Subject Code : GSB5103Z
Country : South Africa
Assignment Task:
GSB5103Z - International Finance for Development Assignment Help

Task Description

a. The authors find that Africa’s portfolio flows are volatile and unstable during the study period. What are the implications of this finding to development financing?

b. The paper finds that a 1% depreciation in the real exchange rate results in an increment in net FDI flows equal to 0.045% (holding interest rate differentials constant) and 0.076% (after controlling for interest rate differentials).

1) In the paper, the authors identify interest rates as a potential channel of transmission between exchange rates and FDI flows. What other channels of transmission can you think of?

2) Assuming that FDI flows is regarded, in the sampled countries, as an important source of funding for development projects, what appropriate policy responses could the governments deploy, given these findings, to promote FDI flows? (Discuss from both fiscal and monetary policy points of view, citing your sources.)

3) The effects described above are not, however, uniform across all the country categories examined in the paper. For instance, lagged real exchange rate depreciation, acting jointly with interest rate differentials, causes net FDI flows to decrease by 0.070% in the sub Saharan African region and to decrease by 0.069% in the Northern African region.

(i) What can potentially explain these differences?

(ii) What policy responses would you recommend that Sub-Saharan African countries implement in order to promote FDI as a source of development finance?

 

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  • Posted on : December 12th, 2018
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