Uncertainty, Flexible Exchange Rates, and Agglomeration

Luca Ricci

Open Economies Review, 2006, vol. 17, issue 2, 197-219

Abstract: This paper shows that exchange rate volatility promotes agglomeration of economic activity. Under flexible rates, firms prefer to locate in large countries, where they would enjoy lower variability of sales, thus reinforcing concentration of firms in such locations. Empirical evidence on OECD countries demonstrates that for small (large) countries or currency areas, exchange rate volatility has a long-run negative (positive) effect on net inward FDI flows. Two implications arise: creating a currency area fosters agglomeration towards the area and dispersion within the area. Copyright Springer Science + Business Media, LLC 2006

Keywords: flexible exchange rates; currency area; agglomeration; location; EMU (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11079-006-6810-9 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Uncertainty, Flexible Exchange Rates, and Agglomeration (1998)
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:kap:openec:v:17:y:2006:i:2:p:197-219

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-006-6810-9

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().