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The impact of productivity adjusted deviations from PPP on the U.S. inbound FDI: Evidence from Japan, U.K. and Germany

Axel Grossmann and Gokce Soydemir ()

Journal of Economics and Finance, 2006, vol. 30, issue 2, 140-154

Abstract: In this paper, we investigate the degree to which productivity adjusted deviations from PPP influence the U.S. inbound FDI. Our results show a significant negative relationship between productivity adjusted misalignments and the U.S. inbound FDI from Germany and the United Kingdom in the short-run, and a positive relationship in the long-run. Hence, indicating that a positive misalignment—undervalued U.S. dollar—leads to a decrease in the U.S. inbound FDI in the short-run and to an increase in the long-run. No significant evidence is found for Japan. Interestingly, unadjusted real exchange rate changes show no statistically significant relationship with respect to the U.S. inbound FDI. Copyright Springer 2006

Date: 2006
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DOI: 10.1007/BF02761481

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