ABSTRACT

This chapter aims to consider capital movement based upon the inward flow of foreign direct investment (FDI) into Central Europe. It investigates some closely correlated factors mainly in the case of Central European countries. The chapter attempts to find a reasonable position on capital movements from the perspective of international economic relations based upon the investigations of Strange. As indicated in the Daihatsu-FSO case, FDI is closely connected with the large amounts and long-term capital movement, and to foreign exchange reserves and foreign debt. The FDI inflow with technology transfer and capital movement would contribute not only to more scale and more efficient production but also make a currency crisis less probable. For preventing currency crises and for growing foreign exchange reserves the inflow of FDI has been significant, and as far as foreign exchange reserves is concerned, variables related to economic growth indicate significant correlation.