Foreign Direct Investment: Analysis of Aggregate Flows

Assaf Razin and Efraim Sadka

MPRA Paper from University Library of Munich, Germany

Abstract: Economists tend to favor the free �ow of capital across national borders, because it allows capital to seek out the highest rate of return. Unrestricted capital �ows may also o¤er several advantages, as noted by Feldstein (2000). First, international �ows reduce the risk faced by owners of capital by al- lowing them to diversify their lending and investment. Second, the global integration of capital markets can contribute to the spread of best practices in corporate governance, accounting standards, and legal traditions. Third, the global mobility of capital limits the ability of governments to pursue bad policies. 1

Keywords: Foreign Direct investment; Foreign Portfolio Investment (search for similar items in EconPapers)
JEL-codes: F2 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (6)

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