The Effect of Democracy on FDI (Foreign Direct Investmant) Term Paper

The Effect of Democracy on FDI (Foreign Direct Investmant) - enclosure Paper ExampleThere are a number of concerns that are made when considering the effects of nation on contradictory direct investing. Theoretical perspectives have consistently linked inappropriate direct investing to government policy. The pervading logic behind these coronations is not a matter of great complexity. In these regards, investors have been dumb to remain more apt to invest long-term companies and corporate interests based on the host states ability to create policy measures that are most conducive to such investment. The complexity emerges as theorists attempt to determine the appropriate government climate for such investments. Currently the United States receives the most contrary direct investments, leading economists to prominently link FDI to the representative governmental organise (greyhill). Within the confines of the democratic political construction there are a number of partic ular policy considerations that have been established. genius of the most prominent theoretical perspectives on this matter is that foreign direct investment is directly reactive to changing economic situations. Jensen notes, Elected politicians can no longer manipulate monetary policy, but monetary policy does remain responsive to changing economic conditions (Jensen, pg. 2). In this context of understanding, the nature of the democratic preference process itself does not necessarily benefit foreign direct investment, but creates a governmental structure that is highly conducive to developing policies that aid FDI. The main notion is that the encouragement of foreign direct investment must be accomplished in a dynamic context and that the democratic governmental structure is most conducive to this dynamism. In addition to the importance of a dynamic government policy to foreign direct investment, there is a number of other of elements positive linking democracy to FDI in terms of stability. In these regards, pervasive notions of democratic governments having more stability are one of the primary contributors to an increase in FDI (Jensen). bit such perspectives on the democratic political structure have been proven erroneous in specific contexts, one considers the current economic fallout in Greece as a primary example it is oft the perception that drives the reality. Another predominant link between democracy and FDI in terms of stability occurs as a result of the democratic process of checks and balances. Jensen notes, The institutional checks and balances associated with democratic systems decrease the likelihood of policy reversal, providing multinationals with a de facto commitment to policy stability (Jensen, pg. 4). With the stability afforded by these checks and balances, corporations are able to more accurately expect future returns. Ultimately, it is this stability that greatly While there are considerable arguments for the linkage of democra cy to foreign direct investment, counter-arguments exist to this proposition. The main notion is that the nature of governmental policy and foreign direct investment is not as multi-varied as some would contest. This perspective contends that the overwhelming link between foreign investments in a host country is the level of taxation. Jensen notes, Conventional wisdom holds that nations woo multinationals by