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International investment in financial services - ScienceDirect
Source: sciencedirect.com
Article summary:
1. This paper analyzes and models the components of international trade in financial services, such as foreign direct investment in banking for the US, the UK and Germany.
2. A model for FDI in banking is proposed which contains certain explanatory variables peculiar to FDI in banking as compared to FDI in manufacturing.
3. The empirical results of this study indicate that bilateral trade, banks' foreign assets, the cost of capital, relative economic growth, exchange rates and FDI in non-finance industries are the major determinants of foreign investment in banking.
Article analysis:
The article “International Investment in Financial Services” provides an analysis and model of international trade in financial services with a focus on foreign direct investment (FDI) in banking for the US, UK and Germany. The article proposes a model for FDI in banking which contains certain explanatory variables peculiar to FDI compared to other forms of investment such as manufacturing. The empirical results suggest that various factors such as bilateral trade, banks' foreign assets, cost of capital, relative economic growth, exchange rates and FDI in non-finance industries are important determinants of foreign investment in banking.
The article is generally reliable and trustworthy due to its use of statistical data from reputable sources such as UN World Investment Report (1994). Furthermore, it uses sophisticated econometric techniques to measure the determinants of US FDI in banking which makes its findings statistically more reliable for interpretation. However, there are some potential biases that should be noted when considering this article. Firstly, it only focuses on three countries – US, UK and Germany – which may not be representative enough to draw general conclusions about international investments in financial services. Secondly, it does not explore any counterarguments or alternative perspectives on the issue which could provide a more balanced view on the topic. Finally, it does not mention any possible risks associated with investing internationally which could be useful information for readers who are considering investing abroad.