Why the US allows foreign real estate investment

Document Type:Thesis

Subject Area:Politics

Document 1

Background of the Study Today, investors across the globe pry on markets that yield higher returns and security of the investments. As the desire to control diversify investments across countries through the FDI increase, so are prospective countries liberalizing their policies to allow influx of these anticipated investment funds (Grant, 1991). On the basis of the macroeconomic theory, investment flows are enhanced by the theory of comparative advantage which points to the need to actualize investments in safe and secure environment which promise higher yields (Carkovic and Levine, (2005). The high growth rates and strong institutional framework in the US has received the attention of investors across the globe. Concept of International Business International business refers to commercial exchanges that occurs across the borders of a country. basically, the definition includes both small and large conglomerates that import and export goods. As internal demand for externally produced goods increase, so are the commercial transactions expected to rise. The growth of international business is attributed to market liberalization and increased government policy implementation to expand its political influence in other economies. As the growth takes shape, policymakers and legislators have got the regard for limiting the negative impacts of trade barriers through viable legislation and policy frameworks (Grant, 1991). Regardless of the size of the business that pursues the international market, the impediments of such a trade are influential in determining the direction. A country’ policy on international business could either foster to detriment international engagements. Essentially, the organization has to consider the prevailing economic and legal issues in the desired trade partner.

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Foreign Direct Investment The US defines Foreign Direct Investment (FDI) as the ownership or control, which can either be directly or indirectly by a foreigner. The foreigner can be an individual, association, government, partnership, or branch. The crux of FDI is enhanced flow of investments into the country. regardless of the size of the economy, FDI is a crucial aspect in economic growth. The related issues such as technologies, job creation, productivity and increased networks are inevitable in realizing growth in any sector of the economy. FDI contributes to the revenue generation for the economies that accept the investments. The technology and related externalities are critical in determining the growth index of a country. Such issues as employee experience and licensing of organizations are key in fostering a general understanding about external markets and their influence in generating revenues (Ford, Fung, and Gerlowsky, 2014).

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Alternatively, the growth of investments in real estate is attributed to the prevailing economic and policy decisions about the need to create more jobs in the localities as well as increase bilateral diffusion of US firms in other countries (Ford et al. Moreover, the economic issues that has impacted on the US such as the financial crisis of 2008, and the rising debt index has limited developments in the real estate has imperceptibly necessitated increased investments. Also, FDIRE is estimated to contribute immensely to a country’s growth and development index. According to Levy, Ralph and Fatheree (2016) FDIRE is attained through restructuring of the sector achieved by use of modern technology in building and construction as well as optimizing distribution of resources across global economies. Research Objective The objective of the study is to find out why the U.

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Globalization has impacted the prices of assets as well as open up viable economic conditions upon which investments in the assets has taken shape. Globalization is associated with increased accessibility of funds, goods and technical experience that is spurred by the increased mobility of factors of production. As a result, globalization has impacted immensely on the flow of goods through manufacturing, distribution, and asset management (Hampton, 2016). Additionally, the relocation of skilled experts to the developed economies necessitates the investments in assets, with real estate being a key focus for the immigrants. Literature Review of FDIRE in the US The turbulence in the major global like Japan and the UK has indicated tendency to favor foreign investments in the US. Today the focus is shifting to secondary markets where the new FIRPTA legislation promises after-tax-risk-adjusted returns that are associated with increased incomes (Levy, Ralph and Fatheree George, 2017).

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Gocial, Boggs and Luskin (2017) evaluation of the role of CFIUS found out the investments in asset is allowed as long as it does not appear to breach the internal secrecy of the US. For instance, the CPIUS reviewed the Chinese acquisition of a mining company located near a military base. Summary of the Literature The section has explored the critical issues that determine and contributes to investment in real estate by foreigners in the US. From the mainstream understanding of FDI as an enhanced flow of goods, people, and financial resources, investment in real estate is crucial for the growth of the US. The propositions of Dunning and Vernon magnifies the need to serve internal markets because of the associated opportunities and advantages. The theory further creates a reasonable understanding that it is the available conditions in a country that will attract foreign investors to the location.

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Macroeconomic approach The proposition of Kojima gained repute in understanding the necessity of FDI. The analogy of the comparative advantage in internalizing investment initiatives between countries creates the need for investment flows. The macroeconomic fashion of analysis integrates the reason for international trade and subsequent impacts of FDI. E. M. Graham and M. Blomström. Does Foreign Direct Investment Promote Development? Institute of International Economics, Washington DC. blankrome. com/siteFiles/publications//3E4AA1FB258FA72C23E7B82A2366FE67. pdf. Accessed 2 June 2018. Hampton Paul "Three Ways Globalization Impacts Your Real Estate Portfolio Strategy | NKF Global Corporate Services". lexology. com/library/detail. aspx?g=44967242-1168-4708-8395-82a4e4051794. Accessed 2 June 2018. Loungani, Prakash. pdf. Accessed 3 June 2018. Urquhart-Bradley Nicole, "Foreign Investors Will Continue to Favor U. S. Assets".

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