engleski

Financial dichotomy of foreign direct investments: Foreign exchange inflow and foreign exchange outflow

Abstracting from the advantages that foreign direct investments could have on the financial sector of the host country, in this article the results of research from which it is apparent that, under certain circumstances, foreign direct investments could result in significant financial disadvantages are shown. Using an economic model it is shown that, initially, foreign direct investments mean foreign exchange inflow, and later, if they are profitable, foreign exchange outflow for the host country. The more profitable they are, the more foreign exchange outflow there will be. If the host country is small, open, and a highly indebted country, which for any reason, does not have sufficient foreign exchange inflows, growing foreign exchange outflow could have disadvantageous consequences for its international liquidity. It is possible to solve that problem by attracting export-oriented foreign direct investments. A quantitative analysis was conducted on the basis of data for the Republic of Croatia, for the period 2005-2009. In this country, foreign direct investments are not generally export-oriented, so if inflows of new investments decrease in the future, foreign exchange outflows could additionally increase the country's high international indebtedness.

foreign direct investments; foreign exchange inflow; foreign exchange outflow; income account; international liquidity ;

nije evidentirano