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

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.
Publication date: November 1997
ISBN: 9781451856781
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This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

International - Economics , International - Economics , investors , foreign investors , foreign investment , direct investment , foreign direct investment

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