Exchange rate factors, income levels, and investment abroad: An empirical study based on a sample of emerging economies

Yu Ma and Xinqian Du

International Journal of Finance & Economics, 2022, vol. 27, issue 2, 1711-1730

Abstract: With the continuous advancement of economic globalization, the rapid growth of investment abroad by emerging economies has become an important part of international capital flows. By building dynamic panel models using 1993–2016 data from 49 emerging economies, this study investigate the effects of exchange rate factors and economic development levels on investment by emerging economies. The findings are as follows. First, exchange rate changes and exchange rate flexibility had significant effects on investment abroad by emerging economies. Second, for emerging economies with different income levels, there are significant differences in factors affecting foreign investment. The impact of exchange rate changes, exchange rate flexibility, and the interaction between the two on a country's foreign investment is related to the country's income level.

Date: 2022
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