Last year,outlays by foreign direct investors to acquire or establish businesses in the United States surged to $201.0 billion, 2 1/2 times the previous record of $79.9 billion set in 1996 and almost triple the 1997 level of $69.7 billion ( table 1 and chart 1). The 1998 outlays were boosted by two exceptionally large acquisitions, each of which significantly exceeded the size of any previous single investment. However, even without these two investments, outlays were still about 40 percent higher than those in 1996.
A new data set on foreign–owned establishments supports an analysis of regional patterns of foreign direct investment in the United States (FDIUS) that uses comprehensive establishment data and is based on geographic areas that are defined on an economic basis rather than on a strictly political or administrative basis. A key feature of the data set is the separate identification of newly built, or “greenfield,” establishments. Greenfield establishments are of particular interest in the analysis of FDIUS because they indicate explicit locational choices by the foreign owners at the time of the investment.
The Overseas Development Council was prescient in calling for an international dialogue on globalization last year. It is a particularly important time for a dialogue on the relationship between globalization and development, given new concerns raised by the global financial crisis.
Topic:
Development, Economics, Emerging Markets, Globalization, and International Trade and Finance
The quarter-point increase in the fed funds rate announced at the November 16 Federal Open Market Committee (FOMC) meeting was accompanied by the adoption of a neutral directive for the inter-meeting period, in place of the bias towards tightening in force since early October. The directive indicates that the Fed intends the rise to be the last of this year. However, the OECD, in its recent Economic Outlook, predicted that another one percentage point increase in the fed funds rate will be needed to restore demand and supply to equilibrium. While the economy will probably not slow sufficiently of its own accord, the incentives to defer action into 2000 mean that rates are likely to remain as they are during 1999, though probably associated with an announced bias towards tightening.
In recent weeks, economic data has produced conflicting signals about the strength of domestic demand within the US economy. A majority within the Federal Open Market Committee (FOMC) believes that growth will decelerate and that only a small tightening of monetary policy will be necessary in the short term. However, the Federal Reserve has consistently underestimated domestic demand, and there are signs that the economy is still buoyant. Moreover, with improving economic prospects in Europe and Asia, the external forces encouraging lower US interest rates are likely to be reversed. The combination of these factors could put pressure on the Fed to tighten further.
The recent financial crises in many emerging market economies have raised anew questions about the appropriate exchange-rate regime and the use of capital controls as policy instruments. The use of both mechanisms should be tailored to each country's unique circumstances. Fixed exchange-rate mechanisms, such as dollarization (adopting the dollar as legal tender in place of the national currency), are suited to small open economies or those desperate to import monetary stability. Larger economies, such as the European Union (EU) and the United States, should allow their currencies to float. Intermediate regimes that fall between fixed- and floating-rate regimes—such as bands, baskets, and crawls (See Figure 1 for definitions)—are still appropriate for some countries. Certain well-targeted restrictions on the composition of capital flows might be appropriate for some emerging-market countries as temporary measures when inflows are particularly high.
The leading index increased 0.4 percent, the coincident index increased 0.2 percent, and the lagging index increased 0.5 percent in December. Taken together, the three composite indexes and their components show a healthy economy: The coincident indicators show that the economy continued to expand through the end of 1999. The leading indicators point to a continuation of the expansion during 2000. Cyclical imbalances and related economic instability problems should be monitored for future increases.
The leading index increased 0.3 percent, the coincident index increased 0.2 percent, and the lagging index increased 0.3 percent in November. Taken together, the three composite indexes and their components show a healthy economy: The coincident indicators point to GDP rising in the 4th quarter of 1999. The leading indicators point to a continuation of the expansion. Cyclical imbalances and related economic instability problems should be monitored for future increases.
The leading index held steady, the coincident index increased 0.6 percent, and the lagging index decreased 0.1 percent in October. Taken together, the three composite indexes and their components show a healthy economy: The coincident indicators point to GDP rising in the 4th quarter of 1999. The leading indicators have paused after strong growth early this year. Cyclical imbalances and related economic instability problems should be monitored for future increases.
The leading index decreased 0.1 percent, the coincident index decreased 0.2 percent, and the lagging index increased 0.4 percent in September. This report merits careful interpretation, but does not change general conclusions drawn from previous releases, which show the economy is in good health: The coincident indicators point to GDP rising in the 4th quarter of 1999. The leading indicators point to a continuation of the expansion through early 2000. Cyclical imbalances and related economic instability problems must be monitored for future increases.
The leading index decreased 0.1 percent, the coincident index increased 0.2 percent, and the lagging index increased 0.2 percent in August. Taken together, the three composite indexes and their components show a healthy economy: The coincident indicators point to GDP rising at a pace of 3.0 percent (annualized) in the 3rd quarter of 1999. The leading indicators point to a continuation of the expansion through early 2000. Cyclical imbalances and related economic instability problems do not seem to be a problem yet.
The leading index increased 0.3 percent, the coincident index increased 0.2 percent, and the lagging index increased 0.6 percent in July. Taken together, the three composite indexes and their components show a healthy economy: The coincident indicators point to economic activity rising in the 3rd quarter from the 1.8 percent (annualized) rise in GDP in the 2nd quarter. The leading indicators point to continuation of the expansion through early 2000. Cyclical imbalances and related economic instability problems show inconsistent patterns of growth.
The leading index increased 0.3 percent, the coincident index increased 0.4 percent, and the lagging index decreased 0.4 percent in June. Taken together, the three composite indexes and their components show a very healthy economy: The coincident indicators point to economic activity rising at a pace of 2.7 percent (annualized) in the 2nd quarter of 1999, compared to the advance estimate of GDP showing a 2.3 percent increase. The leading indicators point to continuation of the expansion through early 2000. Cyclical imbalances and related economic instability problems are almost nonexistent.
The leading index increased 0.3 percent, the coincident index increased 0.2 percent, and the lagging index held steady in May. Taken together, the three composite indexes and their components show a healthy economy: The coincident indicators point to GDP rising at a pace of over 2.5 percent (annualized) in the 2nd quarter of 1999. The leading indicators point to a continuation of the expansion through the remainder of 1999. There is little evidence of cyclical imbalances that would jeopardize the economy's stability.
The leading index decreased 0.1 percent, the coincident index increased 0.2 percent, and the lagging index increased 0.4 percent in April. Taken together, the three composite indexes and their components show a healthy economy: The coincident indicators point to activity continuing to rise at the start of the 2nd quarter of 1999, but at a pace that is much more modest than the 4.1 percent (annualized) rise in GDP in the 1st quarter. The leading indicators point to a continuation of the expansion through at least the 4th quarter of 1999. Evidence of cyclical imbalances from the lagging indicators—that might threaten the stability of the economy—is neither consistent nor convincing.
The leading index increased 0.1 percent, and both the coincident and lagging indexes increased 0.2 percent in March. Taken together, the three composite indexes and their components show a very healthy economy: The coincident indicators show aggregate economic activity growing at about a 3.25 percent annualized pace in the 1st quarter of 1999 (compared to a 4.5 percent increase in the advance estimate of GDP). The leading indicators point to a continuation of the expansion for at least six more months. Cyclical imbalances and related conditions are unlikely to jeopardize the economy's stability.
The leading index increased 0.2 percent, the coincident index increased 0.3 percent, and the lagging index increased 0.2 percent in February. Taken together, the three composite indexes and their components show a healthy economy: The coincident indicators point to GDP rising at a pace of about 3 percent (annualized) in the 1st quarter of 1999. The leading indicators show odds are high that the expansion will continue through at least late-1999. There is little evidence of cyclical imbalances that would jeopardize the economy's stability.
The leading index increased 0.5 percent, the coincident index increased 0.2 percent, and the lagging index increased 0.4 percent in January. Taken together, the three composite indexes and their components show generally healthy conditions: The coincident indicators show that, although industrial production fell slightly, the first quarter of 1999 started on a positive note. The leading indicators are almost unanimous in predicting continued growth through at least the middle of the year. Signs of cyclical imbalances and other factors that might jeopardize the economy's stability remain relatively subdued.