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Globalization in the world
Globalization in the world
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In financial terms, Exchange Rates (ER) refer to the worth of two different currencies in regards to each other (Sullivan & Sheffrin, 2003), whereas the Foreign Direct Investment (FDI) refers to the net inflows of foreign investments. This is so if the investment is to acquire a lasting interest in terms of management where the enterprise that is operating in the specific economy in question is a different entity from the investor (Soltani, 2009).
In recent years there has been an increased understanding as to the forces of the concept and usage of economic globalization. This can only be implemented by the utilization of foreign direct investment by the multinational corporations. This is realized where and when a firm forms its base in one country but locates and or acquires its facilities for production in another country or countries. The realization of this could not have been at a greater time than now when there are conclusive reports that between 1986 through 1999, the GDP of the real world grew by at a rate of 2.5 percent annually whereas its export grew by 17.7 percent. What should be noted is the difference so high that no economic conscious business would fail to recognize (Bernard, Jensen & Schott, 2005).
The importance of foreign direct investments cannot be downplayed by any means. There has however been little research as to the importance of its importance of it in the host countries and or host countries as the concept is still pretty young (Blonigen, 2005). This more so can be contributed to the fact that there has been no real decision as to what triggers foreign direct investments. There has however been undisputed proof that most of the US corporations tend to indulge their businesses to India, China, Malay...
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Grubert, H., & Mutti, J. (1991). Taxes, Tariffs and Transfer Pricing in Multinational Corporate
Decision Making. The Review of Economics and Statistics, 73(2), 285-293. Retrieved from http://www.jstor.org/stable/2109519?origin=crossref
Hines Jr., J. R. (1996). Altered States: Taxes and the Location of Foreign Direct Investment in
America. American Economic Review, 86(5), 1076-1094. National Bureau of Economic Research Cambridge, Mass., USA. Retrieved from http://www.nber.org/papers/w4397
Soltani, E. (2009). Foreign Direct Investment. Direct (Vol. 2004, pp. 1-17). Sage Publications,
Inc. Retrieved from http://eprints.lancs.ac.uk/23312/
Stevens, G. V. G. (1998). Exchange rates and foreign direct investment: A note, 20(3), 393-401.
Sullivan, A., & Sheffrin, S. M. (2003). Economics: Principles in action (p. 474). Pearson
Prentice Hall.
The real exchange rate tells us the rate at which we can trade the goods of one country for goods from other countries. The real exchange rate some- times referred to as the terms of trade. To view the exchange rate relationship in real terms using the nominal exchange rate, can be taken samples h a goods produced in some countries, such as cars. Suppose the price of the car with 25,000 dollars, while the price of Japanese cars is 4,000,000 yen . To compare the prices of both cars , we have to transform them into a common currency. If one dollar worth of 80 yen , the price of cars Americans to 80 x 25,000, or 2,000,000 yen. By comparing the price of an American car (2,000,000 yen) and the price of Japanese cars (4,000,000 yen), it can be concluded that the price of the American car is half the price of Japanese cars . In other words, pad a price effect we can swap two American cars to get a Japanese car . Peng count can be written as
Zheng, P. (2009). A comparison of FDI determinants in China and India. Thunderbird International Business Review, 51(3), 263-279. doi:10.1002/tie.20264
I found this article "Foreign direct investment: Companies rush in with the cash" on the financial times website (www.FT.com) published December 11, 2002 written by John Thornhill. The reason for choosing this article is my personal interest in the Chinese economy and its attractiveness to the foreign investors. Apart from the foreign direct investment this topic has also helped me in understanding the impact of Chinese economy on the global market.
Since foreign aid programs are here to stay, it is important to focus on the enormous potential for foreign aid to be effective. One such way is through augmenting a state’s ability to attract foreign direct investment (FDI). FDI is a good option because it has the potential to be a more long-term solution than pub...
Foreign Direct Investment (FDI) in Japan is still in the small level, even Japanese government has promoted it in recent years and it is said to be rapidly growth because of it. What we can say about the FDI in Japan is one of it is the employment of Japanese affiliates of foreign firms (JAFF). This is affiliates of foreign workers in service and manufacturing sectors in Japan. Besides that, according to the report by MITI (Ministry of International Trade and Industry, which is now acknowledge as the Ministry of Economy, Trade and Industry, (METI) for the inward FDI in Japan, there are about 19 foreign subsidiaries in manufacturing industries. For the subsidiaries on non-manufacturing industries the FDI are included of few industries liketransport and telecommunication, wholesale trade, retail trade, services, and others (agriculture, construction, etc.). As an additional knowledge when the FDI in Japan in the service sector of foreign workers is compared to FDI in United States is one fifth less. Which is 0.59% is Japan’s, ratio to the 2.77% is US’s. While, for the manufacturing sector the ratio of Japan is 0.79 % less than United States with 10.48% (Keiko & Kyoji, 2001).
Ott, M. (n.d.). International Capital Flows. Library of Economics and Liberty. Retrieved June 9, 2011, from http://www.econlib.org/library/Enc/InternationalCapitalFlows.html
The foreign exchange market is one of the most important financial markets. It influences the relative price of goods between countries and can shape trade. It influences the price of imports and can have an effect on a country’s price level (inflation rate). In addition, it influences the international investment and financing decisions. Exchange rates present many risks to a company and a company must be able to hedge itself (Gray, 2003).
Political and legal considerations were given first priority in this analysis with primary emphasis given to whether a country's legal or political system prohibits or impedes foreign investment. If a country's political or legal system discouraged or prevented foreign investment, that country was disqualified from further consideration. Factors considered when assessing the political and legal environment:
In realising that foreign investments are the key source of the nation’s economic rise, the Chinese government has given special preferences to foreign investors (Financial Express, 2006). This is mostly done through reduction of most favoured nation (MFN) tariff rate. In India, on the other hand, fair competition exists between domestic and foreign investors. Although the Indian government states that it aims to reduce its MFN tariff rate, which currently doubles the rate in China, to other ASEAN country levels, it is in reality a big challenge because a large portion of the nation’s tax revenue comes from customs tariffs (Henley, 2004).
Foreign direct investment is a measure of foreign ownership of productive assets such as factories, mines, land and other natural resources.
There is no dout that foreign direct investment (FDI) plays a very significant role in economic growth, according to experiences of new industrial countries in Asia. Over a decade of opening for FDI, we could realize that the more FDI inflows pour into our country the more we benefit. In fact, FDI has contributed a great proportion to fulfill targets on socio-economic development plan and has been one of the most important external sources of Vietnam on the process of industrializing and modernizing the country.
Sukar, A., Ahmed, S., & Hassan, S. (n.d.). THE EFFECTS OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH. Southwestern Economic Review.
Foreign exchange, or Forex, is the conversion of one country's currency into that of another. The value of a country’s currency is set according to factors of supply and demand , if lots of people want to buy one type of currency then its value goes up, which is called appreciating, and if more people are trying to sell it than the value goes down, called depreciating. The value of a country’s currency may be fixed by the country’s government (normally used by smaller countries, who want more
The foreign exchange market is one of important mechanism in the international business because foreign exchange is an intermediary for all nations in term of the growth of the economy. There are many functions of foreign exchange market in the global economy. In the international business, it uses the foreign exchange markets in four ways. First, the pay...
Because this rate, along with the nominal, are constantly in use in the global economy, these rates can fluctuate depending on a range of factors ...