The Effect Of International Trade And Foreign Direct Investment On International Conflict

In the world, the conflicts between countries break up continuously. In some economies, though there is no obvious conflict, there still exist some potential conflicts. The interaction of international economics and international politics becomes more remarkable, therefore, the relationship between international trade, foreign direct investment (FDI) and conflict draw much people's attention.Trade and FDI shows two-sided characteristics, one is inducing conflict, the other is mitigating conflict. Under these circumstances, it is very important to look into the relationship between trade, FDI and international conflict. Nowadays, the key of the world is "Peace and Development". Each country is faced in the problem how to establish the peaceful surroundings. So the net effect of trade and FDI on international conflict is worth studying. China now locates in a crossroad, where there is much potential threat of conflict. What's the net effect of trade and FDI on international conflict? How to resolve international conflict by taking good advantage of economic method? That's the topic which is valuable to be researched.The thesis researches the effect of trade and FDI on international conflict from two aspects. In the theoretical analysis part, the dyads model and multi-country model derives that trade and FDI can cut down conflict between the source country and target country. The more countries in the system, the better effect of trade and FDI are.The game theory model illustrate that, the relative gain problem in the trade and FDI can't be the fuse of international conflict when many countries paticipate trade and FDI. In empirical analysis, the thesis attempted to test the model's conclusion by using panel data of Asia and OECD countries in the 1991-2000 periods. The result is that the trade can mitigate international conflict and promote international cooperation. Through constituting VAR model to do generalise impulse response and variance decomposition, the thesis discovered that the FDI has stronger effect than trade in reducing international conflict. Moreover, trade and FDI could reduce conflict complementarily. The thesis branched up the optimum condition in which trade and FDI could be taken good advantage to reduce international conflict. At last, the thesis provided some suggestion to Chinese trade and FDI combined with China's reality.The innovation points of this thesis are as follows: First, it combined trade and FDI together when analyze effect on international conflict; Second, it point out the optimum conditions in which trade and FDI could be taken good advantage to reduce international conflict; Third, it revise the theoretical models; Forth, it improved the empirical models; Fifth, it put the theories into Chinese practice.