Dynamic Relationships between Exchange Rates and Foreign Direct Investment: Empirical Evidence from Korea
Jung Wan Lee
Asian Economic Journal, 2015, vol. 29, issue 1, 73-90
type="main"> This paper examines the short-run and long-run dynamic relationships between exchange rates and foreign direct investment (FDI) in Korea. Monthly data retrieved from the Bank of Korea from January 1999 to March 2012 are examined. A cointegration test, a vector error correction model, the Wald test and impulse responses techniques are applied to analyze the data. The present study finds that, first, long-run causation between exchange rates and FDI flows exists, which implies that a change in exchange rates negatively affects FDI flows in the long run. Second, short-run causation between exchange rates and FDI flows exists, which confirms that there is reciprocal feedback between the two variables. Finally, the study finds evidence of a structural break from the global financial crisis of 2007–2009 shock to FDI flows in Korea. An external shock affects changes in the endogenous variables and, thus, causes instability in the cointegrating vector in the system.
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:asiaec:v:29:y:2015:i:1:p:73-90
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1351-3958
Access Statistics for this article
Asian Economic Journal is currently edited by Sung Yun-Wing and Shigeyuki Abe
More articles in Asian Economic Journal from East Asian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().