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Effects of Currency Unions on Foreign Direct Investment Inflows: The European Economic and Monetary Union Case

Author

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  • Cuneyt KILIC

    (Department of Economics, Biga Faculty of Economics and Administrative Sciences, Canakkale Onsekiz Mart University, Turkey.)

  • Y lmaz BAYAR

    (Department of Business Administration, Faculty of Business Administration, Karabuk University, Turkey)

  • Feyza ARICA

    (Department of Economics, Biga Faculty of Economics and Administrative Sciences, Canakkale Onsekiz Mart University, Turkey.)

Abstract

Reducing exchange rate and inflation, transaction costs and achieving the economic convergence among member countries are major causes of establishing a monetary union. This paper examines the effects of European Economic and Monetary Union on inflows of foreign direct investments to the Eurozone by using panel data from 16 Group of 20 countries for the period 1999- 2012. We found that real GDP, GDP growth rate and exchange rates of 16 Group20 countries affect inflows of real foreign direct investment positively while exchange rate volatility, inflation volatility and distance affects inflows of real foreign direct investment negatively. So European Economic and Monetary Union contribute to the inflows of foreign direct investment by reducing the exchange rate volatility, inflation volatility and distance and supporting economic growth.

Suggested Citation

  • Cuneyt KILIC & Y lmaz BAYAR & Feyza ARICA, 2014. "Effects of Currency Unions on Foreign Direct Investment Inflows: The European Economic and Monetary Union Case," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 8-15.
    • Handle: RePEc:eco:journ1:2014-01-2
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    Cited by:

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    3. Khalifa Hassanain, 2015. "Special Drawing Right and Currency Risk Management," International Journal of Economics and Financial Issues, Econjournals, vol. 5(3), pages 780-785.
    4. Adam Marszk, 2014. "Economic Integration and Foreign Direct Investment: Review of Main Theoretical Concepts," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 2(3), pages 79-89.
    5. Krzysztof Wach, 2014. "Editorial: FDI in Central Europe," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 2(3), pages 5-6.
    6. Jimoh Olakunle SAKA & Ibiyemi Ajoke ONAFOWOKAN & Adekunle Ademayowa ADEBAYO, 2015. "Analysis of Convergence Criteria in a Proposed Monetary Union: A Study of the Economic Community of West African States," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 230-239.

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    More about this item

    Keywords

    European Economic and Monetary Union; Group 20 Cuntries; Foreign Direct Investment; Panel Data Analysis;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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