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Exchange Rates and Foreign Direct Investment: Theoretical Models and Empirical Evidence

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  • Phillips, Shauna
  • Ahmadi-Esfahani, Fredoun Z.

Abstract

Over the past decades, growth in foreign direct investment (FDI) has stimulated significant attempts at developing theories that explain this trend. One line of this research explores the relationship between exchange rates and FDI. There is no consensus about the nature of this relationship in either the theoretical or empirical work. In this article, we critically appraise this body of work, and find the theoretical studies to be making ground in exploring the complexities of FDI, but the empirical evidence to be constrained by data problems.

Suggested Citation

  • Phillips, Shauna & Ahmadi-Esfahani, Fredoun Z., 2008. "Exchange Rates and Foreign Direct Investment: Theoretical Models and Empirical Evidence," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 1-21.
    • Handle: RePEc:ags:aareaj:161899
    DOI: 10.22004/ag.econ.161899
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    2. Balaban, Suzana & Živkov, Dejan & Milenković, Ivan, 2019. "Impact of an unexplained component of real exchange rate volatility on FDI: Evidence from transition countries," Economic Systems, Elsevier, vol. 43(3).
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