Policy Reform, Adjustment Costs, and Investment: With Activity of Local Investors as a Signal

Omotunde Johnson

No 1997/148, IMF Working Papers from International Monetary Fund

Abstract: Adjustment assistance is provided to local investors responding to policy reform and facing adjustment costs, to facilitate their activity–a signal to foreign investors about the profitability of investing in the local economy. The government, in providing assistance, maximizes its utility subject to its budgetary constraint, taking into account the utility forgone in alternative uses of budgetary funds. Foreign investors use the signal to update beliefs about investors in the local economy and compute the expected return from investing in the country. The investment response of foreign investors depends on the expected return so computed relative to the expected returns in their alternative investments worldwide.

Keywords: WP; investor; local investor; foreign investor (search for similar items in EconPapers)
Pages: 21
Date: 1997-11-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=2401 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1997/148

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().