Correlational Relationships of Presidential Politics and Dollar Value on U.S. Net Foreign Investments

Correlational Relationships of Presidential Politics and Dollar Value on U.S. Net Foreign Investments

Author: 
Nikita Armstrong Nichols
Program of study: 
D.B.A.
Abstract: 
Political processes, particularly democratic policies of the United States (U.S) presidents, have played significant role in investment strategies of Multinational Corporations (MNCs) since the 1970s. This study used quantitative multiple regression analysis to estimate the correlational relationships between the U.S. net foreign direct investment (FDI) and the presidential policies, real long-term interest rates, and the weighted dollar values from the period 1975 to 2011. The sample variables, including the net foreign direct investment, the real interest rates (30-year Treasury bond rates minus inflation rates), and the weighted value of the U.S. dollar with major industrial trading countries using 1973 as the constant year were collected from the U.S. Department of Commerce, Bureau of Economic Analysis public databases and archival tables with numerical data. The presidential party politics (dummy variable) was suitable for determining the correlational impact on FDI in the United States in the observed period. The first major result in the study was that the political party of the president had significant correlational relationship with the U.S. net FDI in the observed period. U.S. political stability attracts foreign financial flows. Sound political policies drive foreign investments (Jakobsen and De Soysa, 2006). Moreover, there was a significant correlation relationship between real interest rates and U.S. net FDI at the five percent level. This result lends support to the Fisher effect which argues that investors are real interest rate conscious. However, there was no correlational relationship between the weighted value of the U.S. dollar and U.S. net FDI in the observed period. Finally, the combined influence of the presidential policies and the Federal Reserve policies (long-term interest rates) was statistically significant on the level of U.S. net foreign investments.
Dedication: 
I dedicate this research to Mama. You taught us all to better ourselves. Education and learning is my way of honoring you. I am thankful for the time that we spent together.
Acknowledgements: 
I would like to acknowledge my dissertation committee, Dr. John Barkoulas and Dr. C. Augusto Casas, for helping me along this journey. I appreciate your continued support throughout this process. I would like to acknowledge and thank my committee chair, Dr. Daniel Smith. I could not have finished the program without your help and support. I would like to acknowledge all of my friends and family for your support through this journey. Thank you, Wendy Thomas, for listening and encouraging me with your kind words.