(see Equation 14.5 in Table 14.2), at least in the short run. Per capita income does not seem to benefit as much from MNC local borrowing, except
in the lowest- and highest-income groups in these countries (see Equation
14.4 in Table 14.2). In some of the groups it shows negative relationships,
although none of these are significant. One explanation for this seemingly
contradictory result (significant and positive relationship with GNP or lack
of it, or with respect to per capita income) could be the differences in
population growth rate and/or income distribution prevailing in the different income group countries.
SUMMARY AND CONCLUSION
This study investigated the consequences of the borrowing decisions of
foreign direct investors in the local financial markets of developing host
countries. The statistical results indicate that foreign direct investors do indeed borrow in the countries they operate in. However, this practice does
not seem to adversely affect (that is, crowd out) local borrowers. Instead,
the supply of credit seems to increase and accommodate all borrowers,
public and private. Regarding the development momentum in these countries, foreign direct investors' local borrowing shows a positive, and in most
cases significant relationship with gross national product in all income
groups. It is government borrowing that shows a mixed result (both
negative and positive) in its relationship with gross national income.
See, among others, Robert Z. Aliber, "A Theory of Direct Investment, The International Corporation," in A Symposium, edited by
Charles P. Kindleberger ( Cambridge, MA: MIT Press, 1970), pp. 17-34; John H. Dunning, International Production and the Multinational Enterprise ( Boston: Allen & Unwin, 1981); M. Kraska, and Koji Tiara, "Foreign Capital, Aid, and Growth in Latin America," Developing
Economies 12, no. 3 ( September 1974):214-18; R. Nurkse, Problem of Capital Formation in Underdeveloped Countries ( New York: Oxford University Press, 1953); and G. F. Papanek
, "Aid, Foreign Private Investment, Savings, and Growth in Less
Developed Countries," Journal of Political Economy 81, no. 1 ( January-February,
K. B. Griffin, and
J. L. Enos, "Foreign Assistance: Objectives and Consequences," Economic Development and Cultural Change 18 ( April 1971):313-27; United Nations, Multinational Corporations in World Development ( New York: Praeger, 1974); T. Weisskopf, "The Impact of Foreign Capital Inflow on Domestic
Savings in Underdeveloped Countries," Journal of International Economics 2, no. 1
( February 1972).
Isaiah Frank, Foreign Enterprise in Developing Countries ( Baltimore, MD: Johns Hopkins University Press, 1980); Rajnish Mehra, "On the Financing and Investment Decisions of Multinational Firms in the Presence of Exchange Risk," Journal
of Financial and Quantitative Analysis ( June 1978):29-47; G. L. Reuber, et al., Private
Foreign Investment in Development ( London: Oxford University Press, 1973).