Exchange Rate as a Determinant of Foreign Direct Investment: Does it Really Matter? Theoretical Aspects, Literature Review and Applied Proposal
AbstractThis paper re-examines the role of exchange rates as determinant of FDI. It extends the analysis to include the issue of how exchange rates determine the decision of invest in one country depending on whether the firm is deciding to invest on the country to service the local market or to invest on the country in order to re-export. This paper offers a broad literature review of the state of the empirical research in order to draw conclusions of the real importance of the exchange rate as a determinant of FDI. Details of FDI current behavior in Latin American are described and I propose a model of FDI to be applied for these countries. Data sources are given.
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Bibliographic InfoPaper provided by EconWPA in its series International Trade with number 0511016.
Length: 20 pages
Date of creation: 27 Nov 2005
Date of revision:
Note: Type of Document - pdf; pages: 20. Published in 'Ecos de Economia' at
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FDI; Exchange Rates; Exchange Rates Volatility;
Find related papers by JEL classification:
- F1 - International Economics - - Trade
- F2 - International Economics - - International Factor Movements and International Business
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6344, National Bureau of Economic Research, Inc.
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- Campa, Jose M., 2002. "Exchange rate crises and bilateral trade flows in Latin America," IESE Research Papers D/470, IESE Business School.
- Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
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