Exchange Rates and Competition for FDI

Yuqing Xing and Guanghua Wan

No RP2004-64, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: This paper analyses the role of exchange rates in the competition for FDI. Based on the assumption that two countries compete for FDI from the same source country, the paper shows explicitly that the relative FDI of one country is determined by the relative real exchange rate between its currency and that of the source country. The theoretical result suggests that, if the currency of one FDI recipient country appreciates against the source country more than that of its rival, its FDI inflows will decrease while the competing country's FDI will increase.

Keywords: Economic policy; Foreign exchange; International business enterprises; International trade; Panel analysis (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (4)

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