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Foreign direct investment and exchange rate uncertainty in South‐East Asia
Author(s) -
Gottschalk Sylvia,
Hall Stephen
Publication year - 2008
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.355
Subject(s) - diversification (marketing strategy) , exchange rate , foreign direct investment , economics , volatility (finance) , liberian dollar , east asia , monetary economics , us dollar , international economics , financial economics , business , china , macroeconomics , finance , geography , archaeology , marketing
We investigate the relationship between exchange rate volatility, exchange rate risk diversification and the location of foreign direct investment in the manufacturing industries of Indonesia, Malaysia, Philippines and Thailand. We found a strong role for the yen/dollar exchange rate in location decisions of the US and Japanese investors. There is evidence in the literature that Japanese firms invest in Asia to circumvent the appreciation of the yen. Our results show that the volatility of the yen and the correlation between local exchange rates and the yen are significant determinants of the US and Japanese investments in the region. Copyright © 2007 John Wiley & Sons, Ltd.