Business cycle determinants of US foreign direct investments

Lilia Cavallari and Stefano d'Addona

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the role of output fluctuations and exchange rate volatility in driving US foreign direct investments (FDI). Using a sample of 46 economies over the period 1982-2009, we provide evidence of a positive relation between US FDI and host country’s cyclical conditions. Allowing for asymmetry over the business cycle, we find that the output elasticity of foreign investments is higher in booms than in recessions. An increase in exchange rate volatility, on the other hand, has a strong deterrent effect on US foreign investments. This effect is fairly stable over the business cycle.

Keywords: FDI; business cycle; cyclical output; exchange rate volatility (search for similar items in EconPapers)
JEL-codes: C23 E32 F23 (search for similar items in EconPapers)
Date: 2012-12
New Economics Papers: this item is included in nep-bec, nep-int and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:43616

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