Multinational Financial Management, 10th solution manual ch_06

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1、CHAPTER6COUNTRYRISKANALYSISImovedthischapterfromthesectiononforeigninvestmentanalysistothissectionbecauseIhaveconcludedthattheinternationaleconomicenvironmentisheavilydependentonthepoliciesthatindividualcountriespursue.Giventhecloselinkagebetweenacountry’seconomicpoliciesandthedegreeofexchange

2、risk,inflationrisk,andinterestrateriskthatmultinationalcompaniesandinvestorsface,itisvitalinstudyingandattemptingtoforecastthoseriskstounderstandtheircauses.Simplyput,attemptstoforecastexchangerates,inflationrates,orinterestratesarehelpedimmenselybyadeeperunderstandingofhowthoseeconomicparamet

3、ersareaffectedbynationalpolicies.Atthesametime,noonecanintelligentlyassessacountry’sriskprofilewithoutcomprehendingitseconomicandpoliticalpoliciesandhowthosepoliciesarelikelytoaffectthecountry’sprospectsforeconomicgrowth.Ispendsometimediscussingthenatureofpropertyrightsandtheirimplicationsforp

4、oliticalriskandeconomicdevelopment.ThechapterexaminestheexperiencesofLatinAmericancountriesandEasternEuropeancountriesandaddressesthequestionofwhatittakestopromoteeconomicgrowth.Agooddiscussionofpropertyrightsandtheireffectsoneconomicgrowthcanbebasedontheend-of-chapterproblems.Thisdiscussionse

5、rvestointroducethetopicofcountryriskanalysis–theassessmentofthepotentialrisksandrewardsassociatedwithmakinginvestmentsanddoingbusinessinacountry.Thisisavitaltaskformultinationalfirmsandinternationalbanks,whomustconstantlyassessthebusinessenvironmentsofthecountriestheyarealreadyoperatinginaswel

6、lastheonestheyareconsideringinvestingin.Similarly,privateandpublicinvestorsalikeareinterestedindeterminingwhichcountriesofferthebestprospectsforsoundinvestments.Ultimately,investorsareinterestedinwhethersensibleeconomicpoliciesarelikelytobepursuedbecausecountriesadoptingsuchpolicieswillgeneral

7、lyhavegoodbusinessenvironmentsinwhichenterprisecanflourish.However,becausepoliticalconsiderationsoftenleadcountriestopursueeconomicpoliciesthataredetrimentaltobusinessandtotheirowneconomichealth,thefocusofacountryriskanalysiscannotbeexc