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The effect of the euro on foreign direct investment

  • Petroulas, Pavlos

In this paper the recent effect of the European Monetary Union on inward FDI-flows is examined. We use a difference-in-differences approach and fixed effects with common time controls. The estimated results of the latter approach show that the introduction of the Euro raises inward FDI by 17 percent within the Euro-area and by 9 and 12 percent to and from non-member countries respectively. Moreover the geographical effects of the Euro are explored. The results show partial agglomeration tendencies for the euro area. There are also some indications of increased importance of vertical specialization in the sample.

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File URL: http://www.sciencedirect.com/science/article/B6V64-4MKTXYS-1/2/c85dbe5e5c4fe85705e564c396b0003c
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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 51 (2007)
Issue (Month): 6 (August)
Pages: 1468-1491

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Handle: RePEc:eee:eecrev:v:51:y:2007:i:6:p:1468-1491
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  1. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc.
  2. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
  3. Bruce A. Blonigen & Ronald B. Davies & Keith Head, 2002. "Estimating the Knowledge-Capital Model of the Multinational Enterprise: Comment," NBER Working Papers 8929, National Bureau of Economic Research, Inc.
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  10. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
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  12. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
  13. Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113.
  14. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007. "Estimating models of complex FDI: Are there third-country effects?," Journal of Econometrics, Elsevier, vol. 140(1), pages 260-281, September.
  15. repec:rus:hseeco:122512 is not listed on IDEAS
  16. Alejandro Micco & Ernesto H. Stein & Guillermo Luis Ordoñez, 2003. "The Currency Union Effect on Trade: Early Evidence from EMU," Research Department Publications 4339, Inter-American Development Bank, Research Department.
  17. David Barr & Francis Breedon & David Miles, 2003. "Life on the outside: economic conditions and prospects outside euroland," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 573-613, October.
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  19. Bruce A. Blonigen & Ronald B. Davies, 2000. "The Effects of Bilateral Tax Treaties on U.S. FDI Activity," NBER Working Papers 7929, National Bureau of Economic Research, Inc.
  20. Bruce A. Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," NBER Working Papers 11299, National Bureau of Economic Research, Inc.
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