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Exchange rate uncertainty and the timing of Chinese Outward Direct Investment

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  • Qi, Jianhong
  • Liu, Hui
  • Zhang, Zhaoyong

Abstract

This paper investigates the timing of Chinese ODI under exchange rate uncertainty by employing the Cox proportional hazards model. Using matched data this paper finds both exchange rate level and volatility are the important determinants, and RMB depreciation and greater volatility will deter ODI. Such adverse effect is found more striking for non-SOEs, firms in the eastern region, and non-exporting firms. With China’s recent exchange rate formation mechanism reform, the impact of exchange rate uncertainty is expected to be stronger. These findings have important implications for China’s exchange rate regime reform and its “Going Global” strategy.

Suggested Citation

  • Qi, Jianhong & Liu, Hui & Zhang, Zhaoyong, 2021. "Exchange rate uncertainty and the timing of Chinese Outward Direct Investment," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 1193-1204.
    • Handle: RePEc:eee:reveco:v:76:y:2021:i:c:p:1193-1204
    DOI: 10.1016/j.iref.2019.11.008
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    More about this item

    Keywords

    Exchange rate uncertainty; ODI timing; Delayed investment; Survival analysis;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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