Exchange Rate Variability and Foreign Direct Investment - Consequences of EMU Enlargement

Brzozowski, Michał

Exchange Rate Variability and Foreign Direct Investment - Consequences of EMU Enlargement

No 258, CASE Network Studies and Analyses from CASE-Center for Social and Economic Research

Abstract: The aim of the paper is to analyze theoretically and empirically the likely impact of the reduction in exchange rate uncertainty, due to the EMU accession, on the intensity of FDI inflow into candidate countries. Theoretical models give an ambiguous picture of how exchange rate uncertainty and volatility affect direction and magnitude of FDI inflows. The main contribution of this paper is in finding that exchange rate uncertainty and volatility may negatively influence the decision to locate investment in transition and accession countries. Nominal exchange rate uncertainty seems to particularly hamper FDI inflows in accession countries. The key finding of this paper is that euro adoption is likely to exert a positive influence on FDI inflows in accession countries.

Keywords: foreign direct investment; exchange rate uncertainty and volatility; transition; euro adoption (search for similar items in EconPapers)
Pages: 26 Pages
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Journal Article: Exchange Rate Variability and Foreign Direct Investment: Consequences of EMU Enlargement (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:sec:cnstan:0258

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