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The Effect of the Euro on Foreign Direct Investment

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  • Pavlos Petroulas

    ()
    (Bank of Greece, Economic Research Department)

Abstract

In this paper the recent effect of the European Monetary Union on inward FDI-flows is examined. We use a difference-in-differences approach for both a gravity based- as well as a general equilibrium approach. The estimated results show that the introduction of the euro raises inward FDI by 14 to 16 percent within the euro area by 11 to 13 percent from non-member and weakly by 8 percent to non-member countries. Moreover the geographical effects of the euro are explored. The results show partial agglomeration tendencies for the euro area. There are also some indications of increased importance of vertical specialization in the sample.

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File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper200648.pdf
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Bibliographic Info

Paper provided by Bank of Greece in its series Working Papers with number 48.

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Length: 43 pages
Date of creation: Oct 2006
Date of revision:
Publication status: Published in: European Economic Review Vol.51,pp.1468-1491.
Handle: RePEc:bog:wpaper:48

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Web page: http://www.bankofgreece.gr
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Keywords: Foreign Direct Investment; EMU; Panel Data;

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