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The Effect of the Euro on Foreign Direct Investment

Pavlos Petroulas ()

No 48, Working Papers from Bank of Greece

Abstract: In this paper the recent effect of the European Monetary Union on inward FDI-flows is examined. We use a difference-in-differences approach for both a gravity based- as well as a general equilibrium approach. The estimated results show that the introduction of the euro raises inward FDI by 14 to 16 percent within the euro area by 11 to 13 percent from non-member and weakly by 8 percent to non-member countries. Moreover the geographical effects of the euro are explored. The results show partial agglomeration tendencies for the euro area. There are also some indications of increased importance of vertical specialization in the sample.

Keywords: Foreign Direct Investment; EMU; Panel Data (search for similar items in EconPapers)
JEL-codes: F21 F0 C23 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2006-10
New Economics Papers: this item is included in nep-eec and nep-ifn
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Published in: European Economic Review Vol.51,pp.1468-1491.

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http://www.bankofgreece.gr/BogEkdoseis/Paper200648.pdf Full Text (application/pdf)

Related works:
Journal Article: The effect of the euro on foreign direct investment (2007) Downloads
Working Paper: The Effect of the Euro on Foreign Direct Investment (2004) Downloads
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