Exchange rate strategies in the competition for attracting FDI

Agnès Benassy-Quere, Lionel Fontagné and Amina Lahrèche-Revil
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Amina Lahrèche-Revil: Université d'Amiens, TEAM - Université Paris 1 and CEPII

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

Abstract: Building on the needs for long term capital inflows in developing countries, this paper reconsiders the choice of an exchange-rate regime by integrating the determinants of multinational firms locations. The trade-off between price competitiveness and a stable nominal exchange rate is modeled. It is shown that exchange rate volatility is detrimental to foreign direct investment, and that its impact compares with misalignments. The main result is that the builfing of currency blocks could be a way of increasing FDI to emerging countries as a whole. The frontiers of monetary areas would then be strongly influenced by geography, as FDI is

Keywords: Foreign direct investment; exchange rate regime; monetary regionalism; risk diversification (search for similar items in EconPapers)
JEL-codes: F21 F23 F31 F33 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2000-01
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Published in Journal of the Japanese and International Economies, 15, (2), 2001, pp.178-198

Downloads: (external link)
https://shs.hal.science/halshs-03773690 (application/pdf)
https://doi.org/10.1006/jjie.2001.0472

Related works:
Working Paper: Exchange Rate Strategies in the Competition for Attracting FDI (2000)
Working Paper: Exchange rate strategies in the competition for attracting FDI (2000)
Working Paper: Exchange rate strategies in the competition for attracting FDI (2000)
Working Paper: Exchange Rate Strategies in the Competition for Attracting FDI (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:wpsorb:bla00007

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