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Currency risk and the dynamics of German investors entry and exit in Russia

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  • Deseatnicov, Ivan
  • Klochko, Olga

Abstract

Using a complete manually collected set of 3435 Russian firms with German capital in 2003–2020, we examine the effect of currency risk on the dynamics of German investors' entry and exit into the Russian market via foreign direct investment. We document that German investors were relatively tolerant towards currency risk before 2014, and became highly sensitive post 2014. We conclude that, along with geopolitical factors, the free floating exchange rate regime adopted by the Central Bank of Russia in 2014 affected the incentives of German investors. We discuss various mechanisms to explain these findings.

Suggested Citation

  • Deseatnicov, Ivan & Klochko, Olga, 2023. "Currency risk and the dynamics of German investors entry and exit in Russia," Emerging Markets Review, Elsevier, vol. 55(C).
    • Handle: RePEc:eee:ememar:v:55:y:2023:i:c:s1566014123000286
    DOI: 10.1016/j.ememar.2023.101023
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    More about this item

    Keywords

    Free float exchange rate regime; FDI dynamics; Multinational enterprises; Currency risk;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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