RECENT DIRECT INVESTMENT PATTERNS:Move to Direct Investment

RECENT DIRECT INVESTMENT PATTERNS:Move to Direct Investment

Until the emergence of international firms, all private foreign investments were portfolio investments rather than direct investments. The push to direct investment began in the 1920s, but even then, portfolio movements were about double the direct ones. During the Depression of the 1930s it became obvious that portfolio investors, especially those from the United States who were the main suppliers of foreign capital, had chosen foreign projects unwisely. Direct investments fared much better and their value recovered somewhat in the late 1930s.8 Since World War II, direct investment by U.S. firms has grown substantially. Direct investment by firms from other industrial countries grew slowly for a number of years after World War II. During this time, firms from those countries were busy rebuilding their domestic markets and were short of funds to invest on the outside. Since about 1965, their direct investment positions have expanded rapidly.

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