IMPACT OF MULTILATERAL TRADE AND INVESTMENT AGREEMENT ADHERENCE ON BILATERAL INVESTMENT FLOWS: A GRAVITY MODEL ANALYSIS

Abstract

This paper assesses the effects of adherence to multilateral agreements on trade and investment on the inflow of foreign direct investment. It adapts the gravity model of trade to test the hypothesis that greater adherence to multilateral agreements on trade and investment ought to yield an increase in foreign direct investment. Controlling for country and time effects, the paper finds sufficient evidence greater adherence of investment importing countries to multilateral agreements has a positive effect on FDI inflows.