WEEK 11 (Lecture outline)

WEEK 11 (Lecture outline) - DEVELOPMENT ECONOMICS ECOS 3002...

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DEVELOPMENT ECONOMICS ECOS 3002 Second Semester, 2010 Weeks 11: International Finance/Investment/Aid & Development The International Flow of Financial Resources Three sources Private investment Remittances of earnings Development assistance (Figure 14.3) Private Foreign Direct Investment and the Multinational Corporation Definition of MNC MNC: Size, Patterns, and Trends Recent growth of foreign direct investment (FDI) Private foreign investment: pros and cons for development Filling savings S=gk : if the saving that can be domestically mobilized amounts to only 16% and 21% is needed to reach output growth targets, there is a 5% savings gap. If the nation can fill this gap with foreign financial resources it will be more able to achieve the target rate of growth. (when development is defined in terms of GDP growth rates; S=I)
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Filling the FX/trade gap c/r 2 gap models - the gap between targeted FX requirements and those derived from net export earnings+net public foreign aid inflow of private foreign capital can alleviate the deficit on CA BOP deficits and remove the deficit over time if the MNC can generate a net positive flow of export earnings. Filling the gap between targeted govt tax revenues and locally raised tax – MNCs are taxed on their profits (capital gains tax) and for participating financially in their local operations (corporate tax). LDC governments are better able to mobilize public financial resources for development projects. Filling the gap in management, entrepreneurship, technology and skill by the local operations of private foreign firms – MNCs provide financial resources, factories, “package” of needed resources including ibid. that can be transferred to their local counterparts by means of training programs and the process of learning by doing. MNCs can educate local managers about how to establish networking connections with overseas banks, locate alt. sources of supply, diversify market outlets and become better acquainted with intl marketing practices. MNCs transfer modern machinery and capital equipment
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This note was uploaded on 08/22/2011 for the course FINC 2011 taught by Professor Craigmellare during the Three '10 term at University of Sydney.

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WEEK 11 (Lecture outline) - DEVELOPMENT ECONOMICS ECOS 3002...

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