REINVESTED EARNINGS ON DIRECT FOREIGN INVESTMENT

Reinvested earnings on direct foreign investment are accounted for differently in A System of National Accounts 1968 and the System of National Accounts 1993. In this paper these treatments are compared in relation to the connection between national income accounting and macroeconomic theory. For this purpose, macroeconomic modelling is represented by an attempt to extend the closed-economy Cambridge model of growth and distribution to a two-country trading world.