Bubbles, FDI, winners and losers

I’m so sorry I am still away – currently a bit caught up!  I will be back posting properly and answering comments in a few days.

For now, here is the latest article I’ve popped up on Rates Blog.

In it I discuss what it means for there to be a “bubble” due to foriegn investment, and I mull over long-term foriegn investment.  I am relatively terse in the article, this probably stems from my lack of sleep and the fact I’m busy 😉

I conclude:

Foreign investment and the associated capital flows have been a net positive for New Zealand in the past.

Let’s not forget this as we try to figure out what policy to set in a post-Global Financial Crisis world.

I have no doubt that this article will be unpopular with close to everyone.  That is fine.

4 replies
  1. Eric Crampton
    Eric Crampton says:

    I think we could set a drinking game on the comments thread you’re likely there to attract.

    Rates Blog needs this kind of thing, but I doubt it’ll do any good. Hickey has carved out a bit of a niche in bad populist economics combined with some financial journalism; his audience likes what he provides.

  2. Luc Hansen
    Luc Hansen says:

    There must be a Laffer Curve for FDI, Matt. If there isn’t, maybe I’ll draw it up and proclaim it as my own. I think I’ll start with a simple inverted parabola on a table napkin, figure out the axis labels (if that’s really necessary), and lo and behold! I’ll be famous!

    Other than that observation, I find your logic persuasive, but the real problem, as I understand it, is when the money departs even faster than it arrived. As Cyprus is experiencing right now.

    • Matt Nolan
      Matt Nolan says:

      I’d note that Cyrus doesn’t have a floating exchange rate to represent that risk – when NZ does. That is the big kicker 😉

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