Exchange Rate Variability and Foreign Direct Investment - Consequences of EMU Enlargement
AbstractThe aim of the paper is to analyze theoretically and empirically the likely impact of the reduction in exchange rate uncertainty, due to the EMU accession, on the intensity of FDI inflow into candidate countries. Theoretical models give an ambiguous picture of how exchange rate uncertainty and volatility affect direction and magnitude of FDI inflows. The main contribution of this paper is in finding that exchange rate uncertainty and volatility may negatively influence the decision to locate investment in transition and accession countries. Nominal exchange rate uncertainty seems to particularly hamper FDI inflows in accession countries. The key finding of this paper is that euro adoption is likely to exert a positive influence on FDI inflows in accession countries.
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Bibliographic InfoPaper provided by CASE-Center for Social and Economic Research in its series CASE Network Studies and Analyses with number 0258.
Length: 26 Pages
Date of creation: 2003
Date of revision:
foreign direct investment; exchange rate uncertainty and volatility; transition; euro adoption;
Other versions of this item:
- Michal Brzozowski, 2006. "Exchange Rate Variability and Foreign Direct Investment: Consequences of EMU Enlargement," Eastern European Economics, M.E. Sharpe, Inc., vol. 44(1), pages 5-24, February.
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