EXCHANGE RATE VOLATILITY AND MNCs' PRODUCTION AND DISTRIBUTION NETWORKS: THE CASE OF JAPANESE MANUFACTURING MNCs
Toshiyuki Matsuura () and
Shujiro Urata ()
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Shujiro Urata: Graduate School of Asia-Pacific Studies, Waseda University, Nishi-Waseda Bldg. 7F, 1-21-1 Nishi-Waseda, Shinjuku-ku, Tokyo 169-0051, Japan
The Singapore Economic Review (SER), 2008, vol. 53, issue 03, 523-538
This paper empirically examines the impacts of exchange rate volatility on the location choice by Japanese multinational corporations (MNCs) and their intra-firm trade. We use affiliate-level data for Japanese MNCs for 1995, 1998 and 2001. We found that high exchange rate volatility discourages the establishment of an affiliate by MNCs. Moreover, the high exchange rate volatility causes the shift from inter-firm to intra-firm transactions. These findings imply the importance of maintaining a stable exchange rate environment in order for MNCs to expand their production and distribution networks.
Keywords: Exchange rate volatility; location choice; intra-firm trade (search for similar items in EconPapers)
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