Currency Union and Investment Flows: Estimating the Euro Effect on FDI

Marián Dinga () and Vilma Dingová
Additional contact information
Marián Dinga: CERGE-EI, http://www.cerge.cuni.cz/

No 2011/25, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: This paper studies the effect of the euro introduction on international FDI flows. Using country-pair data on 35 OECD economies during 1997-2008 and adopting the propensity score matching as identification strategy, we investigate the impact of the euro on capital reallocation. In general, the euro exhibits no significant impact on FDI. However, the effect becomes significant on the subset of EU countries, increasing FDI flows by 14.3 to 42.5 percent. Furthermore, we find that the EU membership fosters FDI flows much more than the euro, increasing FDI flows by 55 to 166 percent. Among other FDI determinants, high gross domestic product, low distance between countries and low unit labor costs in target country have a positive effect on FDI. On the contrary, long-term exchange rate volatility deters FDI flows.

Keywords: monetary union; foreign direct investment; common currency area; euro (search for similar items in EconPapers)
JEL-codes: E42 F15 F21 (search for similar items in EconPapers)
Pages: 23
Date: 2011-07, Revised 2011-07
New Economics Papers: this item is included in nep-eec, nep-ifn, nep-int, nep-mac, nep-mon, nep-opm and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://ies.fsv.cuni.cz/default/file/download/id/17144 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://ies.fsv.cuni.cz/default/file/download/id/17144 [301 Moved Permanently]--> https://ies.fsv.cuni.cz/default/file/download/id/17144)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2011_25

Access Statistics for this paper

More papers in Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies Contact information at EDIRC.
Bibliographic data for series maintained by Natalie Svarcova ().