Strategic Microeconomic Considerations of Macroeconomic Analysis: Fiscal, Trade and Security Impacts of Aerospace and Defence

Abstract

ABSTRACT The usage of foreign direct investment (FDI) is a crucial element in the economic growth literature focusing on sustainable development. In the case of the aerospace sector, security considerations restrict FDI flows and the market-based creation of multi-national enterprises (MNEs), even more than they restrict trade. The role of the government is instrumental as such industries as they exercise significant control over structure and performance through procurement and regulatory aspects. Moreover, there are countries like the US whose aerospace is a leading exporting sector, while significant government expenditure flows impact through fiscal policy the economy at large. The analysis in this paper applies a sectoral analysis of economic development based on the ownership-location-internalization (OLI) theoretic framework for MNE activity for the case of the aerospace industry combined with the strategic trade and macroeconomic implications. The behavior of the government is examined within the macroeconomic, strategic economic and security framework towardidentifying a comprehensive framework of analysis.