Economic Adjustment through Foreign Direct Investments: A Literature Review

Abstract

Trade liberalization has been a driving force behind globalization, fostering economic interdependence among nations. Trade agreements, both bilateral and multilateral, play a crucial role in shaping international economic relations. The research on economic adjustment to the demands of the modern international environment is quite demanding and complex. Understanding these dynamics requires a multifaceted approach to internationalization trends, one form of which is FDI. The purpose of this paper is to capture the phenomenon of FDI, its motivations, and its potential effects in the economic adaptation to international environment. The study’s analysis was based on a bibliographic review of the literature. Foreign direct investment is a critical component of international economic relations, influencing economic growth and development and adjustment. In this paper, as recorded in the literature review, basic forms of internationalization, theories and findings on the global economy, international trade and FDI, the role of FDI in periods of economic crises and the course of FDI in countries with adjustment programs will be provided and analysed, among others. The literature review for this study concludes with factors that push economic policymakers to turn to the choice of foreign direct investment as well as the impact that these have on economic adjustment to the international environment.