01771cas a2200241 a 4500 AALejournalIMF001044 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451855470 1018-5941 BD-DhAAL BD-DhAAL Lehmann, Alexander. Country Risks and the Investment Activity of U.S. Multinationals in Developing Countries / Alexander Lehmann. Washington, D.C. : International Monetary Fund, 1999. 1 online resource (27 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper develops a simple real options model that demonstrates the role of country-specific risk and sunk costs in determining a multinational's choice between exports and foreign investment. The hypotheses from the model are tested for the distribution of capital expenditures by U.S.-owned foreign affiliates in 29 developing countries during 1984-95. Political and economic risk ratings are identified as deterrents to foreign capital formation; scale economies, unit wage differentials, trade openness, and agglomeration effects are found to be stimulating. These findings provide an additional rationale for a multilateral investment agreement that could function as an agency of restraint. Mode of access: Internet IMF Working Papers; Working Paper ; No. 1999/133 Full text available on IMF http://elibrary.imf.org/view/journals/001/1999/133/001.1999.issue-133-en.xml IMF e-Library