A 3 page proposal for researching this topic. Capital movement across international borders often is dictated by changes in exchange rates, and capital movement into the US has the ability to directly affect the trade deficit, unemployment, general economic factors and the overall economy. The proposed research will seek to define the extent to which foreign exchange rates affect international investors’ willingness to place capital within the United States. Bibliography lists 7 sources.
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Introduction Foreign direct investment (FDI) in the United States in 2000 was $314 billion. It was $72 billion in 2003, more than
double the $30 billion of 2002 (Foreign Direct Investment in the United States is Down 75 Percent Since 2000, 2004). The purpose of the proposed research is to explore
the implications of this reversal and to assess how changes in foreign exchange rates affect FDI in the United States. Balance of Payments
The Organization for Economic Cooperation and Development (OECD) (2004) reports that the United States trade deficit currently is at the highest it has ever been. The OECD Economic Outlook
(2004) suggests a series of planned economic shocks that could bring the US trade situation closer to sustainability, but none of those alternatives is overly attractive, of course.
In 2002, the last year for which figures are available, more than 35 percent of the FDI inflow into the United States was devoted to
manufacturing (Foreign Direct Investment in the U.S.: Balance of Payments, 2002). This may not immediately seem to be overly significant until assessing the assignment of the other 65 percent
of incoming FDI. Wholesale trade was the next most popular destination for incoming FDI, at only 14 percent of total FDI inflows. Information services and finance followed wholesale
trade, at 13.7 percent and 12 percent, respectively (Foreign Direct Investment in the U.S.: Balance of Payments, 2002). The next most popular industry for foreign direct investment in 2002
was depository institution, which received less than 6 percent of the total FDI into the United States. The point is that, even though