Theoretical Models Based on a Flowchart Approach to Industrial Cluster Policy

Kuchiki Akifumi

No 33, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: This article examined the issue of whether or not the currency exchange rate, country risk, and cooperate tax rate affect decisions of multinational firms to invest in industrial clusters. First, if the exchange rate between a multinational company in an industry of diminishing returns to scale and a developing country is appreciated, then production in the developing country should increase. Second, if the investment period becomes longer, the currency exchange rate of a multinational company's country should be revalued more in order for it to further invest in the developing country. Third, if the investment period becomes longer, the developing country's risk should become less. Fourth, compensation for the developing country's high risk can be made by lowering its corporate tax rate.

Keywords: Flowchart approach; Industrial cluster policy; Capacity building; Institutions; Exchange rate; Country risk; Corporate tax rate; Foreign investments; Industrial policy; Econometric model; International business enterprises; Asia; East Asia; Southeast Asia; 国際投資; 産業政策; 経済モデル; 世界企業; 多国籍企業; アジア; 東アジア; 東南アジア (search for similar items in EconPapers)
JEL-codes: L22 L5 R11 (search for similar items in EconPapers)
Date: 2005-08-01
New Economics Papers: this item is included in nep-cse and nep-sea
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Citations: View citations in EconPapers (1)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 33. 2005-08-01

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