The U.S. Productivity Figures and Foreign Direct Investment in Japan

Benjamin Adam Abugri and Gokce Soydemir ()
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Benjamin Adam Abugri: Department of Economics and Finance, The University of Texas-Pan American, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2002, vol. 05, issue 01, 53-69

Abstract: In this paper, we present empirical evidence linking the movements in the U.S. $/Yen exchange rate and the U.S. productivity figures to the U.S. outbound foreign direct investment (FDI) in Japan by constructing a five variable vector autoregressive (VAR) model. Our results show a lagged and statistically significant negative response of the U.S. FDI to a one standard deviation increase in the U.S. productivity figures. We further find that a once and for all appreciation in the U.S. dollar increases the U.S. FDI in Japan which is consistent with the earlier findings in the literature. The U.S. export figures, however, are found to serve as a complement to the U.S. outbound FDI whereas the impact of the U.S. imports from Japan on the U.S. outbound FDI is found to be negative. The results support the view that a productivity increase in the U.S. decreases the amount of the U.S. outbound foreign direct investment in the long run.

Keywords: U.S. Productivity; Foreign Direct Investments; Exchange Rates and VAR Model (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219091502000699

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