Larch, MarioYoto V, Yotov2025-06-182025-06-182025-05-25The World Bank Economic Reviewhttps://hdl.handle.net/10986/43352This paper quantifies the relationships between deep trade agreements and foreign direct investment (FDI). The analysis relies on a structural framework that simultaneously enables (a) estimating the direct impact of deep trade agreements on FDI, (b) translating the partial deep trade agreement estimates into general equilibrium effects on FDI, and (c) obtaining partial deep trade agreement effects on trade and quantifying the impact of deep trade agreements on FDI through trade. The effects of deep trade agreements on both trade and FDI are sizeable, positive, and statistically significant. A counterfactual analysis suggests that together with direct and indirect channels deep trade agreements have contributed to a large but asymmetric increase in inward versus outward FDI.en-USCC BY 3.0 IGOFOREIGN DIRECT INVESTMENT (FDI)TRADE LIBERALIZATIONDEEP TRADE AGREEMENTSJournal ArticleWorld Bank