Japanese FDI into U.S. service industries: Exchange rate changes and services tradability

Kasaundra M. Tomlin

Japan and the World Economy, 2008, vol. 20, issue 4, pages 521-541

Abstract: Using the implications of the model of investment under uncertainty, this paper provides a systematic examination of the FDI-exchange rate relationship with respect to services taking into account the degree of tradability across services. Services have mainly been addressed in the literature as a sensitivity test by industry using aggregated service data identified as "nonmanufacturing". Using data on Japanese FDI into 207 U.S. service industries, maximium-likehood estimates reveal that dollar appreciations are positively correlated with service FDI flows into the U.S. This positive correlation is stronger for non-tradable services versus tradable services. For tradable and non-tradable producer services, higher exchange rate uncertainty may lead to fewer FDI occurrences. On average, across all types of services, higher U.S. unit labor costs relative to Japan had a deterrent effect on Japanese service FDI as well. Finally, this paper also provides a useful benchmark to partition services by tradability.

Keywords: Foreign; direct; investment; Exchange; rates; Services (search for similar items in EconPapers)
Date: 2008

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6VF1 ... 02acacfbaec01f48078b
Full text for ScienceDirect subscribers only

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: http://EconPapers.repec.org/RePEc:eee:japwor:v:20:y:2008:i:4:p:521-541

Access Statistics for this article

Japan and the World Economy is edited by Robert Dekle and Yasushi Hamao

More articles in Japan and the World Economy from Elsevier
Series data maintained by Heidi Boesdal ().