INTERNATIONAL FINANCE

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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