Final answer:
Investor behavior connects to reform through market-oriented economic changes and globalization, requiring shifts in policies to attract investments and improve human capital. Balancing investor interests with sustainable economic growth is critical, supported by modern technology investments in education and human development.
Step-by-step explanation:
The mechanism that connects investor behavior to reform is largely influenced by market-oriented economic reforms and the increasing globalization trend. High capital mobility allows investors to move capital across borders, exerting pressure on governments for policies beneficial to their investments. These reforms can lead to a shift towards floating exchange rate regimes, which can affect investment returns and influence investor behavior.
In the face of globalization, developing countries must adapt by implementing market reforms to attract investment, which implies removing barriers that protect powerful domestic interests. These changes often require improvements in areas like health and education - or human capital development. However, there is a risk associated with dependence on international financial capital, as seen during the Asian Financial Crisis where economies collapsed due to sudden capital outflows. Therefore, maintaining a balance between attracting investor interest and implementing reforms that bolster economic stability and growth is crucial. Modern technology also plays a role in facilitating this balance by supporting investments in education and human capital development.