Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208309
Authors: 
Sondermann, David
Vansteenkiste, Isabel
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper No. 2275
Abstract: 
In this paper we investigate the impact of the euro integration process on the drivers of FDI inflows. We show theoretically and empirically that the single currency alters the drivers of FDI inflows across its Member States. Estimating bilateral gravity models of FDI inflows into euro area countries, we show that the euro facilitates intra-euro area vertical FDI flows but reduces incentives for horizontal or market seeking FDI. Instead, horizontal FDI flows stemming from investor countries located outside the monetary union increase. Such flows are however not more likely be directed towards euro area countries with larger domestic markets but rather to countries that are close to large euro area markets and that have higher quality institutions. Overall, these results suggest that while the euro has been beneficial to FDI inflows into the monetary union, the impact differs significantly across countries. The global financial crisis does not change our main findings. Our results are robust to various economic specifications.
Subjects: 
Foreign direct investment
euro
economic structures
institutions
euro area countries
JEL: 
F21
F23
F45
O43
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3537-1
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.