THE EFFECT OF FOREIGN INVESTMENT ON THE BALANCE OF PAYMENTS.

In the current context, foreign investments, as distinguished from grants, has been viewed as an issue of growing importance for the U.S. economy. It has been argued that the flow of the U.S. public and private funds overseas could bridge the still lingering dollar gap, create employment at home and may assist in the development of less advanced countries. This policy might be agreeable to all since loans and investments are usually subject to the payment of amortization and interest, the inflow of funds so produced is expected after a relatively short interval to exceed the outflow, a phenomenon which seems to be embarrassing to both the borrower and the lender. On the other hand, the waiving of interest and amortization might offend international dignity and be so upsetting to the "sound business" sense of the U.S. Congress that the payment of amortization and interest may be the lesser of the two evils. In the light of above these issues the article investigates the relationship between the inflow and outflow of funds which a continuous policy of foreign investment and lending will produce.