Tuesday, May 24, 2022

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    How do local monetary policies affect multinational finance and investment decision-making?

    Monetary policy, one of the most important policies in the banking system as well as for the economy. It inculcating variants like Repo rate, Reverse repo rate, Statutory Liquidity Ratio, and cash reserve ratios. One Financial Year records the government’s Revenue and Expenditure. If there is a budget surplus then the federal government of a country can provide loans to other nations or can spend on infrastructural expansion and development, or else if there is a budget deficit then the government has to borrow to pay off their commitments, and then the cycle of loan starts. Now to pay off these loans they will take more loans.

    In these situations of disbalance of BOP, countries who are a part of the IMF can look up to IMF for funds if the fund requiring country is unable to collect funds from numerous sources. Money is provided with proper verification and documentation. India’s total debt is calculated to be $ 2.41 trillion US, and it is estimated to be $ 2.71 trillion US.   If a country is highly drowned in debts, then there will be a change in investment patterns of FDI.  Low per capita income indicates low taxation in the country and high spending by the government, more borrowings year on year, and a decrease in the trustworthiness of the country.  

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