Proposal on Impact of Financial Crisis on Fdi Finance Essay

Foreign direct investment being an important determinant of economic growth was affected badly during the recent financial crisis causing unemployment, fall in output and consequently losses.Therefore there has it has been of great importance to analyse it closely and develop appropriate strategy to ammeliorate the situation. The purpose of the research proposal in to provide a better understand of the influences of FDI before, during and after the financial crisis.furthermore importance was also given to other factors that has a direct relationship with FDI such as political stability and appropriate economic policies across different countries that is develped and developping countries.Moreover secondary data will be mainly use during the research and basing on that we will proceed with further analysis. The expected result of the study will determine in contrast to other countries the extent to which a particular countrys FDI has affected with its nearly "unique" ecomomic policies.The benefit of this reasearch proposal will be mainly to those people dealing in the finance sector.

Introduction

Sine World War II, the deespest global final crisis the world economy suffered was in 2008-2009. Financial Crisis can be define as a global decline in ouput, employment and trade causing assets prices to fall sharply and consequently causing failures of large financial intermediaries, and disruption in foreign exchange market (Allen and Snyder 2009 adapted from De Bonis et al., 1999).For an economy to perfom well the smooth and easy flow of capital form the surplus units to the in-need units is required and across countries its called Foreign direct investment.In order to achieve economic growth and development hence boost the market position of the company, it should in engage itself in attracting other companies in purchasing material goods and shares (Ali and Shedlock, 2010).

As mentioned before that FDI is the key that can lead a company to a superior position on the market while ensuring economic growth and development.However there is a need to understand the finanacial havoc that has occurred and the likely consequences to be followed. Firstly, the ineffectiveness of imoportant firms, many porsperous and popular banks in America and Europe experienced losses, for example Lehman brothers and the collapse of stock market caused a decline in the financial structure that weakened the world-wide economic performance (Chari, Christiano and Kehoe, 2008; Gupta 2010).Secondly the service sector such as airline and manufacturing companies was also badly affected by this crisis (UNCTAD, 2009).Hence a global analyse of the changes that have influence the evolution of FDI during the 3 state that is before, during and after the financial crisis is important.

Moreover, beside there are other factors that have influence FDI but there only a few studies that has carried down to analyse their influence on FDI and financial development.Some of the studies are; how in the presence of political corruption, FDI and financial development would interact (Kholdy and Sohrabian, 2008; La Porta et al., 1998; La Porta et al., 1999, 2000, 2002; Mauro 1995; Morck et al., 2000) and how a flexible rate regime and the maintainance of economic policies frequently can help to overcome financial distress (Azvedo and Terra ,2009).Certain marketers and policy makers believes that theres exist certain solution to reduce this calamity.

Problem Statement

There are various problems that this study will face.They are as follows;

Firstly, in assessing the impact of financial crisis on global FDI we will have to based and build on our study by using secondary data that is using data since it is nearly impossible to carry out our surveys and other method to collect data globally. While using secondary data weare relying on these information to proceed with our study.The problems that arises are that sometimes these information may not be necessarily true such that they have been subject to alteration and modification for personal interest of a particular party and secondly we might not find exactly what we were searching for but insstead have to sort the data in such a way that they fits our study.

Secondly, we have to asses how developed and less developed countries were affected by this crisis.Assesing each country seperately has less importance than assesing the differential extent of the crisis to a particular country in relation to other country. This is a very challenging work as different country has different economic policies and political stability. Various types of flow of FDI are volatile as they fluctuate according to economic cycles and during period of crisis (Calderon and Didier, 2009).

Aims and Objectives

There are enormous litterature on FDI and our overall aim of this study is not to "reinvent the wheel" but to provide a better understanding of the factors influencing FDI, as financial crisis the main one and the impact of it on develop and less countries.The objectives are as follows

The reaction of foreign direct investment with regard to fiancial crisis

Its impact on the various types of FDI

The impact on both developed and emerging countries

The differential extent to which developed countries was affected with respect to developing countries

The influences of other factors such as economic policies and political corruption on FDI across countries

Measures taken to remedy the situation and analyse aftermath of the financial havoc on the global FDI activities.

Methodology

In our study we will make use of both qualitative and quantitative methods. We will make use mainly of qualitative methods because the research is based on real world observation. On the other side quantitative methods will be use to prove its significance on these countries.

Qualitative methods

Firstly observation in this case might not be a practical methods but however it can be used to help to create hypothesis.

Secondly we will use interviews methods.It involves interviewing people that are engaged in activities of FDI such as Chief executive officers and Finance directors of multinational companies.

Quantitative method

Secondary data analysis witin this section. Secondary data are data that have been gathered for some other purpose.The principal soucres of these data can be obtain from littereture reviews, research papers and internet.

Furthermore, questionnaires also will be used.Both probabilistic and non-probabilistic method of collecting data will be applied. These questionnaires aim at questioning mainly to investment institution, banking institutions and multinational companies.

Benefits of the research

This study will concentrate mainly on the financial sector and it will give a better view of the impact of financial crisis on FDI to many stakeholders such as government, multinational companies and investors.This will help them to can appropriate measures for prosperity.For example the government will manipulate his fiscal and monetary policies to attract multinational companies and on the other hand multinational companies will asses the impact on their profit and hence adopt a new plan of action for overcome it.

 

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