PhD research proposal (Risk of investment of sovereign wealth and

PhD (Risk of investment of sovereign wealth and strategies that can be used mitigate against the risks - Research Proposal Example Reports published by OECD reveal that government-driven mergers and acquisitions reached the peak (almost 20 percent of the total international value) level immediately before the financial crisis struck the Euro zone in 2009. In the subsequent year, this value declined sharply to half. The bulk of this international investment originated in few countries, China, the Middle East and North Africa (MENA) region and few other Asian economies. Recently, SWFs have gained serious attention from the governments of countries around the world on the issue of risk associated with the holding of such wealth and its investment. In this paper, the impact of such risk on the economy is studied and the ways to mitigate risks have been discussed. Background Sovereign wealth funds are funds that are controlled by the government of a country. The government of a nation used this fund to make investments in other economies. Governments make investments in other countries by acquiring the assets located in those countries (Keefe, Fournier and Torys, 2003). The developing nations have also been affected hard by the crisis. However, research shows that due to the fact that these countries are developing, growth rate of these countries are higher than the growth rate of the developed nations (Manganelli and Engle, 2001; Mehta et al., 2012). A gradual but steady shift in power is visible from the West to the Eastern countries. The West is traditionally the centre of economic and financial power and the developed countries of the United States of America and European countries, until now enjoy the maximum economic power and therefore hold the highest political position in the global economy. The ongoing shift in traditional position and power from the western developed countries to the emerging economies in the east, such as China, is associated with higher levels of investment of SWF (Waki, 2010; Saunders and Cornett, 2011). These investments are mostly made in the emerging market eco nomies. Different levels of risks are associated with the SWFs depending on the pattern of investment made with these funds. Economists and policymakers have made different recommendations and suggested divert ways to mitigate such risks (Seagal, 2013). After the Euro zone crisis took place in late 2009, the issue of risks associated with sovereign wealth has been receiving greater importance (Jost, 2009; Saunders, 2013). Through further research it has been identified that the emerging economies are at lower levels of growth but showing higher growth potential than the developed countries (Smith, 2003). Hence investment of SWF is migrating fast towards the emerging economies. Research objective The objective of this research paper is to analyse the risk of investment of sovereign wealth and strategies that can be used mitigate these risks. The researcher aims to check whether risks of investing sovereign wealth adversely affect the economic variables in a country,