AEM_ECON_2300_Lecture_15___Spring_2009

AEM_ECON_2300_Lecture_15___Spring_2009 - Lecture 15...

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Lecture 15 1 of Professor David Lee AEM-ECON 2300 International capital flows International portfolio investment : investment to diversify investor’s portfolio, not involving direct management control versus foreign direct investment (FDI): flow of funding (through lending and/or purchase) to establish or acquire and exert control of a foreign firm, or to expand or reinvest in said firm. Established international threshold: 10% ownership
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Lecture 15 2 of Professor David Lee AEM-ECON 2300 International capital flows Motivations for international capital flows: 1. Maximize expected rate of return on capital 2. Diversify risk within international portfolio (explains two-way investment flows) 3. Market expansion and diversification 4. Minimize costs of production (low wage countries) 5. Horizontal or vertical integration 6. Secure access to raw materials 7. Secure access to promising markets
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Lecture 15 3 of Professor David Lee AEM-ECON 2300 Data from World Investment Report , U.N. Conference on Trade and Development, 2008
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Lecture 15 4 of Professor David Lee AEM-ECON 2300 +30%
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Lecture 15 5 of Professor David Lee AEM-ECON 2300
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Lecture 15 6 of Professor David Lee AEM-ECON 2300
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Lecture 15 7 of Professor David Lee AEM-ECON 2300
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Lecture 15 8 of Professor David Lee AEM-ECON 2300
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Lecture 15 9 of Professor David Lee AEM-ECON 2300
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Lecture 15 10 of Professor David Lee AEM-ECON 2300 U.S. assets abroad vs. foreign assets in U.S.
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Lecture 15 11 of Professor David Lee AEM-ECON 2300 US foreign long-term private international investment position in selected years, 1950-2002 (billions of US dollars, at historical and current cost, at year end) Source: US Department of Commerce, Survey of Current Business (Washington, D.C.: US Government Printing Office, Various issues) year 1950 1960 1970 1980 1985 1990 1995 2000 2002 US investments abroad petroleum 3.4 10.8 19.8 47.6 57.7 52.8 70.2 90.0 91.9 manufacturing 3.8 11.1 31.0 89.3 94.7 168.0 250.3 343.9 392.6 finance    22.5 109.4 228.7 257.2 297.4 other 4.6 10.0 24.7 78.5 55.4 96.8 168.3 625.1 739.0 total 11.8 31.9 75.5 215.4 230.3 427.0 717.5 1316.2 1520.9 foreign investments in the US petroleum 0.4 1.2 3.0 12.2 28.3 42.9 34.9 85.7 111.7 manufacturing 1.1 2.6 6.1 33.0 59.6 152.8 214.5 480.6 470.9 finance  35.5 70.4 115.6 217.0 213.7 other 1.9 3.1 4.2 37.8 61.2 128.8 170.6 473.6 551.7 total 3.4 6.9 13.3 83.0 184.6 394.9 535.6 1256.9 1348.0
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Lecture 15 12 of Professor David Lee AEM-ECON 2300 U.S. Direct Investment Abroad, 2005 Industry Value (billion $) Share (%) Manufacturing 451.4 21.8 Chemicals, computers and electronic products, transportation equip., food,
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AEM_ECON_2300_Lecture_15___Spring_2009 - Lecture 15...

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