Exchange Rates and Outward Foreign Direct Investment: US FDI in Emerging Economies
This paper investigates the effect of exchange rates on US foreign direct investment (FDI) flows to a sample of 16 emerging market countries using annual panel data for the period 1990-2002. Three separate exchange rate effects are considered: the value of the local currency (a cheaper currency attracts FDI); expected changes in the exchange rate (expected devaluation implies FDI is postponed); and exchange rate volatility (discourages FDI). The results reveal a negative relationship between FDI and more expensive local currency, the expectation of local currency depreciation, and volatile exchange rates. Stable exchange rate management can be important in attracting FDI. Copyright © 2009 Blackwell Publishing Ltd.
Year of publication: |
2009
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Authors: | Udomkerdmongkol, Manop ; Morrissey, Oliver ; Görg, Holger |
Published in: |
Review of Development Economics. - Wiley Blackwell. - Vol. 13.2009, 4, p. 754-764
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Publisher: |
Wiley Blackwell |
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