Exchange Rates and U.S. Direct Investment into Latin America
AbstractThis paper analyzes the impact of exchange rate levels and exchange rate uncertainty on U.S. foreign direct investment into Latin America. By decomposing exchange rate uncertainty into temporary (short-run) and permanent (long-run) components, we further explore whether the nature of uncertainty matters. Our empirical findings support the view that exchange rate uncertainty has a negative impact on U.S. investment flows into Latin America. Moreover, it is the persistency in uncertainty rather than transitory uncertainty that mostly deters foreign investment. In contrast, investors do not appear to be affected by discrete movements in exchange rate levels.
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Bibliographic InfoPaper provided by Sam Houston State University, Department of Economics and International Business in its series Working Papers with number 0701.
Date of creation: Mar 2007
Date of revision:
Other versions of this item:
- Isabel Ruiz & Susan Pozo, 2008. "Exchange rates and US direct investment into Latin America," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(3), pages 411-438.
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- Maroula Khraiche & Jeffrey Gaudette, 2013. "FDI, Exchange Rate Volatility and Financial Development: Regional Differences In Emerging Economies," Economics Bulletin, AccessEcon, vol. 33(4), pages 3143-3156.
- Blanco, Luisa R., 2012. "The Spatial Interdependence of FDI in Latin America," World Development, Elsevier, vol. 40(7), pages 1337-1351.
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