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The impact of exchange rate risk on the foreign direct investment of U.S. multinational manufacturing companies

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  • Gregory Clare

Abstract

This paper extends the examination of the effects of exchange rate risk on the foreign direct investment decision of U.S. multinationals in manufacturing. It does so by explicitly developing a model which incorporates exchange rate risk into the objective function of the firm and tests the model on cross-sectional data over the years 1974 to 1977 for investment in both developed and less developed countries. These are the only years for which data on all crucial variables are available. In all cases the risk aversity hypothesis was substantiated and the same model was appropriate for both developed and less developed countries. Copyright Kluwer Academic Publishers 1992

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File URL: http://hdl.handle.net/10.1007/BF01886201
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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 3 (1992)
Issue (Month): 2 (June)
Pages: 143-163

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Handle: RePEc:kap:openec:v:3:y:1992:i:2:p:143-163

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: foreign direct investment; exchange rate risk; parent's participation; foreign market;

References

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  1. Farok J Contractor, 1984. "Choosing Between Direct Investment and Licensing: Theoretical Considerations and Empirical Tests," Journal of International Business Studies, Palgrave Macmillan, vol. 15(3), pages 167-188, September.
  2. Lall, Sanjaya, 1980. "Monopolistic Advantages and Foreign Involvement by U.S. Manufacturing Industry," Oxford Economic Papers, Oxford University Press, vol. 32(1), pages 102-22, March.
  3. Root, Franklin R & Ahmed, Ahmed A, 1979. "Empirical Determinants of Manufacturing Direct Foreign Investment in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 27(4), pages 751-67, July.
  4. Ray, Edward John, 1977. "Foreign Direct Investment in Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 283-97, April.
  5. Culem, Claudy G., 1988. "The locational determinants of direct investments among industrialized countries," European Economic Review, Elsevier, vol. 32(4), pages 885-904, April.
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Cited by:
  1. Gregory Clare & Ira N. Gang, 2010. "Exchange Rate and Political Risks, Again," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 46(3), pages 46-58, May.
  2. 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.

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