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Foreign Direct Investment and Exchange Rate Pass-through: Access to Foreign Markets

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  • Yushi Yoshida

    ()
    (Faculty of Economics, Kyushu Sangyo University)

Abstract

We examine the effects of foreign direct investment on exchange rate pass-through. By distinguishing the purpose of foreign direct investment, different hypothesis for production subsidiary and distribution subsidiary can be tested. We are able to find a clear evidence of “power-shift” effect and “elimination” effect of distribution subsidiary, with foreign direct investment data properly constructed to capture the timing of establishment. We also obtained significant downward effect of local production, conforming to the previous research.

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File URL: http://www.ip.kyusan-u.ac.jp/keizai-kiyo/dp8.pdf
File Function: First version, 2001Feb
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Bibliographic Info

Paper provided by Kyushu Sangyo University, Faculty of Economics in its series Discussion Papers with number 8.

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Length: 15 pages
Date of creation: Feb 2001
Date of revision:
Handle: RePEc:kyu:dpaper:8

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Related research

Keywords: distribution subsidiary; exchange rate pass-through; foreign direct investment;

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  1. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
  2. Yushi Yoshida & Shinji Takagi, 1999. "Exchange Rate Movements and Tradable Goods Prices in East Asia," IMF Working Papers 99/31, International Monetary Fund.
  3. Rudiger Dornbusch, 1985. "Exchange Rates and Prices," NBER Working Papers 1769, National Bureau of Economic Research, Inc.
  4. Bernhofen, Daniel M. & Xu, Peng, 2000. "Exchange rates and market power: evidence from the petrochemical industry," Journal of International Economics, Elsevier, vol. 52(2), pages 283-297, December.
  5. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
  6. Kadiyali, Vrinda, 1997. "Exchange rate pass-through for strategic pricing and advertising: An empirical analysis of the U.S. photographic film industry," Journal of International Economics, Elsevier, vol. 43(3-4), pages 437-461, November.
  7. Gron, Anne & Swenson, Deborah L, 1996. "Incomplete Exchange-Rate Pass-Through and Imperfect Competition: The Effect of Local Production," American Economic Review, American Economic Association, vol. 86(2), pages 71-76, May.
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