Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/28685 
Year of Publication: 
2008
Series/Report no.: 
WIDER Research Paper No. 2008/102
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
The paper investigates the impact 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.
Subjects: 
exchange rate
FDI
foreign exchange
JEL: 
E22
F31
ISBN: 
978-92-9230-158-3
Document Type: 
Working Paper

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