The Impact of Exchange Rate on FDI and the Interdependence of FDI over Time

Joseph Alba, Donghyun Park and Peiming Wang
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Peiming Wang: Auckland University of Technology

No 164, ADB Economics Working Paper Series from Asian Development Bank

Abstract: The paper examines the impact of exchange rates on foreign direct investment (FDI) inflows into the United States in the context of a model that allows for the interdependence of FDI over time. Interdependence is modeled as a two-state Markov process where the two states can be interpreted as either a favorable or an unfavorable environment for FDI in an industry. Unbalanced industry-level panel data from the US wholesale trade sector are used in the analysis and yield two main results. First, the paper finds evidence that FDI is interdependent over time. Second, under a favorable FDI environment, the exchange rate has a positive and significant effect on the average rate of FDI inflows.

Keywords: Basic research; technology creation; technology adoption; economic growth (search for similar items in EconPapers)
JEL-codes: O31 O47 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2009-06
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: THE IMPACT OF EXCHANGE RATE ON FDI AND THE INTERDEPENDENCE OF FDI OVER TIME (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0164

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