Determinants of Intra-FDI Inflows in East Asia : Does Regional Economic Integration Affect Intra-FDI?
AbstractThis paper analyzes the validity of macroeconomic variables, such as exchange rate uncertainty, macroeconomic instability, and openness, in determining intra-FDI inflows in the ASEAN countries, China, Japan, and Korea. Our empirical results show that openness, exchange rates, exchange rate volatility, per capita GDP, and foreign reserve accumulation are statistically significant factors that determine regional intra-FDI inflows; other variables such as macroeconomic instability are not significant. Variables like openness and exchange rate volatility have direct implications for regional FTAs and regional common currency arrangements, and thus to East Asian economic integration. Our findings suggest that a regional FTA that would increase regional openness by 10 percent would increase intra-FDI inflows by almost 2 percent. A regional exchange rate arrangement that would reduce regional exchange volatility by half would increase intra-FDI inflows by around 10 percent.
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Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 21906.
Date of creation: Jan 2007
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FDI; openness; Exchange Rate Uncertainty; exchange rate; Regional Economic Integration;
Find related papers by 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
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