Open AccessReal exchange-rate uncertainty and US foreign direct investment: an empirical analysis
Author(s) -
Christian Schmidt,
Удо Бролл
Publication year - 2009
Publication title -
review of world economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.428
H-Index - 52
eISSN - 1610-2886
pISSN - 1610-2878
DOI - 10.1007/s10290-009-0024-3
Subject(s) - foreign direct investment , exchange rate , economics , monetary economics , interest rate parity , international economics , currency , foreign exchange risk , volatility (finance) , macroeconomics , econometrics
International audienceThis paper empirically analyzes the impact of exchange-rate uncertainty, exchange-rate movements, and expectations on foreign direct investment (FDI). Using data on US outward FDI for the period 1984–2004 we examine two competing measures of exchange-rate volatility. While the standard measure yields a discouraging effect on FDI outflows in all industries the alternative risk specification reveals a clear distinction between manufacturing and non-manufacturing industries, with the latter showing a positive correlation with increased exchange risk. A real appreciation of host-country currency was associated with higher FDI flows, while expectations about an appreciation showed a negative result
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