Impact Of Economic Governance On Total Investment Volatility

The article speaks of one of the problems institutions have been operating in which is the “Law of More”. Institutions have adopted “The Law of More” believing the more they build, spend and expand while diversifying the better chances they have at prospering. When in fact just the opposite has occurred (Denneen, 2012). As institutions continue to operate in this

In Africa for example, savings rates of around 17% of GDP compare to 31% on average for middle income countries. Low savings rates and poorly developed or malfunctioning financial markets make it more expensive for African public and private sectors to get funds for investment as higher borrowing costs impede capital investment. Moreover, in

Kumar (1996) compares trends/fluctuations in key macro-economic variables in India pre and post 1991, both before and after initiation of new Indian economic policy in '91. These reforms included, amongst other things, the opening up of the Indian economy for international trade (prior to this India was a socialist state not involved in these markets) plus investment and heavy de-regulation processes. These particular changes to this policy allow for great insight into the impact of de-regulated, international capital trade on previously effective macro-management. He observes that this new economic policy increased economic instability which facilitates speculative activity, particularly resulting from financial sector liberalisation and the opening up of the economy. He adds that the observed increased volatility in economic fluctuations is a result from state intervention under these new economic policies that have reduced policy effectiveness. To quote: "The NEP not only lay greater stress on market forces but on opening up of the economy to foreign capital. This imposes constraints on policies since government cannot control the external environment which is governed by international finance capital- a force far more powerful than the Indian state hence able to dictate to it". He argues that since the interest of

Ferguson, Niall. The Great Degeneration: How Institutions Decay and Economies Die. N.p.: n.p., n.d. Print.

INSTITUTIONS AS THE FUNDAMENTAL CAUSE OF LONG-RUN GROWTH Daron Acemoglu Simon Johnson James Robinson Working Paper 10481 http://www.nber.org/papers/w10481 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 May 2004

According to the Solow Growth Model, all countries will eventually converge to their long run steady state. If we consider the usual assumptions, of countries producing the same goods with the same constant returns to scale production technology, using (homogenous) capital and labour as factors of production, differences in income per capita income will reflect differences in per capita capital. Therefore, essentially if capital is allowed to flow freely, new investments should occur only in the poorer economy. However this is certainly not the case in reality. Most of the net capital flow in the past four decades has been north-to-north (rich countries investing in other rich countries), rather than north-south (rich economies investing

North illuminates a contradiction in neoclassical economic theory as it relates to structure and change in political-economic systems. On one hand, North demonstrates that neoclassical theory fails to fully explain what causes economic change, and is particularly deficient in explaining the emergence of various ideologies. On the other hand, he presents evidence that rational individual behavior explains specific institutional choices that result in change, both positive and negative. He attempts to resolve this contradiction by offering theories of the state, organizations, and ideology. However, his argument seems reducible to a statement that political-economic institutions change when the benefits of change outweigh the costs, and persist otherwise. This oversimplification does an injustice to

The concept of institutional complementarities revolves around the notion of the idea that ‘the co-existence (within a given system) of two or more institutions mutually enhances the performance contribution of each individual institution’ (Deeg, 2007. P.611). Hopner (2005) argued that the idea of complementary implies that different spheres of institutions could only be combined in a number of ways in order to be effective, which enhanced the theory of the existence of various types of capitalisms. Hall and Soskice (2001) identified these differences in the varieties of capitalism literature and then classified economies into liberal market economies and coordinated market economies, each with its unique institutional complementarities.

The institutionalists’ on the other hand focus on group norms. The analysis of labour markets and employment systems relies on the existence of stable, slow-changing and fairly transparent institutions to provide the foundations for their analysis (Wootton, 1955). The work of social norms has been the foundation upon which institutionalist theorists try to explain how and why labour market structures are the way they are.

In other words, piecemeal investments will not solve the problems of economic development. Regional economic integration, particularly a customs union, can encourage investors to engage in tariff jumping, i.e. investing in one member country in order to trade freely with all members. Another direct impact of FDI, is promotion of knowledge, technology transfers and spillovers, which in turn raise productivity in member countries. In order to attract more investments, African countries need to establish an economic environment that encourages investments. When economies are integrated, foreign investors will be attracted to invest because of economies of scale, a larger market, and because the risk is spread over a wide

There can be little doubt that ‘institutions’ have existed as a central point of scholarship in comparative

Political stability has been found to have a direct impact on FDI (Bannerman, 2007; Li, 2006). Other things assumed constant, democratic and political stable economies attract more FDI than undemocratic and unstable countries. FDI is attracted to democratic countries, since their regimes will more likely respect the rule of law, civil liberties and property rights which are encouraging features to FDI flows (Onyeiwu, 2003). Countries that are characterized as lacking political and institutional stability are considered as high risk which tends to discourage FDI flows (Daniele & Marani, 2006; Hakro & Omezzine, 2011).

I prefer to research this area because corporate governance has played the important role for most successful enterprises, especially for family firms. Furthermore, small and medium size enterprises（SME’S）has played a vital role in the economic development of most countries, such as in Taiwan and the U.K.. Moreover, building enterprises and construction firms are always playing the one of an important industry in every country around the

Better governance can be exercised by making prudent investment decisions by FI’s. They are required to make adequate due diligence of investee by assessing its past performance, feasibility analysis and management quality which enables effective allocation of the limited savings (Yuan et al, 2006). The same research paper also stated number of reasons for FI’s inability to affect governance which included weak legal environment, inadequate disclosures, conflict of interest, monitoring cost, etc but higher state ownership is most significant constraint.

To articulate his argument, Blyth develops the set of hypotheses that perceived institutional change as a sequence of five events that covers from the emergence of crisis to the consolidation of post-crisis institutions (p.34 - 5). Blyth applies this framework to analyze the institutional changes in the United States and Sweden in two periods. The first one covers from the great depression to the end of the second world war while another period began in the late 1960s and early 1970s that inflation became a problem of advanced