Advanced Search
MyIDEAS: Login to save this article or follow this journal

Exchange Rate Risk and Two-Way Foreign Direct Investment

Contents:

Author Info

  • Qin, Jie
Registered author(s):

Abstract

Modern theory of foreign direct investment (FDI) identifies market frictions such as transport costs and tariffs as major obstacles to a firm's access to foreign markets and as important reasons for two-way FDI. An alternative rationale for two-way FDI is offered in the present paper from a theoretical examination of the relation between exchange rate risk and FDI. In a one sector two-country model, it is assumed that producers decide both the domestic and the foreign production capacities so as to maximize the utility function based on rates of return and real exchange rates. It is shown that two-way FDI occurs when deviations from the purchasing power parity are not significant. The higher the exchange rate volatility, the larger the ratio of FDI to export. Two-way FDI reduces the producers' exchange rate risk; under certain conditions, this reduction of exchange rate risk is a driving force for two-way FDI. Copyright @ 2000 by John Wiley & Sons, Ltd. All rights reserved.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www3.interscience.wiley.com/cgi-bin/jtoc?ID=15416
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 5 (2000)
Issue (Month): 3 (July)
Pages: 221-31

as in new window
Handle: RePEc:ijf:ijfiec:v:5:y:2000:i:3:p:221-31

Contact details of provider:
Web page: http://www.interscience.wiley.com/jpages/1076-9307/

Order Information:
Web: http://jws-edcv.wiley.com/jcatalog/JournalsCatalogOrder/JournalOrder?PRINT_ISSN=1076-9307

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Tolentino, Paz Estrella, 2010. "Home country macroeconomic factors and outward FDI of China and India," Journal of International Management, Elsevier, vol. 16(2), pages 102-120, June.
  2. Tolentino, Paz Estrella, 2008. "The determinants of the outward foreign direct investment of China and India: Whither the home country?," MERIT Working Papers 049, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  3. Phillips, Shauna & Ahmadi-Esfahani, Fredoun Z., . "Exchange Rates and Foreign Direct Investment: Theoretical Models and Empirical Evidence," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ijf:ijfiec:v:5:y:2000:i:3:p:221-31. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.