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SEARCHING THE US FDI DETERMINANTS IN THE EU: IS THERE A EURO EFFECT?

Mariam Camarero (), Sergi Moliner and Cecilio Tamarit
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Sergi Moliner: University Jaume I and INTECO, Department of Economics, Campus de Riu Sec, E-12080 Castellón (Spain)

No 1916, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: In this paper, we analyze the potential determinants of US outward FDI with a particular focus on the euro effect during the period 1985-2016. To this aim, we consider a large set of candidate variables based on the theory as well as on previous empirical analysis. We select the covariates using a data-driven methodology, the Bayesian Model Averaging (BMA) analysis. Our sample includes over 90% of its stock and analyze the effect of the euro not only on American FDI in Europe, but also on the rest of the world. Within Europe, we consider the Euro Area (EA) but also core and peripheral members as well as the EU countries. We conclude from the BMA analysis that US MNCs engage in complex integration strategies which involve both horizontal (HFDI) and vertical (VFDI) motives both at the world and European levels. However, HFDI strategies predominate in EA core countries, whereas VFDI prevails in the EA periph-ery. As for the euro effect, the adoption of the common currency seems to have played an important role in the overall US FDI strategy: the launching of the euro has mainly promoted US HFDI in EU and EA countries.

Keywords: FDI determinants; Foreign Direct Investment; US; European Union; Euro area; Bayesian Model Averaging; Variable selection (search for similar items in EconPapers)
JEL-codes: C11 C52 F21 F23 (search for similar items in EconPapers)
Date: 2019-11
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http://repecsrv.uv.es/paper/RePEc/pdf/eec_1916.pdf First version, 2019 (application/pdf)

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