IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Reverse imports, foreign direct investment and exchange rates

  • Xing, Yuqing
  • Zhao, Laixun

This paper investigates linkages among "reverse imports", foreign direct investment and exchange rates. As an example, we have in mind the competition in the Japanese market of a Japanese multinational firm and a Chinese domestic firm. Products are differentiated based on Japanese consumers' brand name recognition. The model shows that yen appreciation leads to an increase in Japanese production in China and "reverse imports" and a decrease in Japanese domestic production. Due to the barriers in brand name, the exports of the Chinese firm could fall, because the increase of reverse imports may erode the market share of the Chinese firm, even though total exports from China increase. Further, we find that yen appreciation may improve the profits of the Japanese firm and welfare in Japan under reverse imports, against conventional wisdom. The predictions of the model fit well with the actual numbers and shed light on the current debate on the Chinese currency.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6VF1-4MNYJX1-1/1/82a5d2e6d830b94ef84e58fa7cd3ad16
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 20 (2008)
Issue (Month): 2 (March)
Pages: 275-289

as
in new window

Handle: RePEc:eee:japwor:v:20:y:2008:i:2:p:275-289
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505557

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Larry D. Qiu & Barbara J. Spencer, 2001. "Keiretsu and Relationship-Specific Investment: Implications for Market-Opening Trade Policy," NBER Working Papers 8279, National Bureau of Economic Research, Inc.
  2. Blonigen, Bruce A, 1997. "Firm-Specific Assets and the Link between Exchange Rates and Foreign Direct Investment," American Economic Review, American Economic Association, vol. 87(3), pages 447-65, June.
  3. Yeaple, Stephen Ross, 2003. "The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment," Journal of International Economics, Elsevier, vol. 60(2), pages 293-314, August.
  4. Karolina Ekholm & Rikard Forslid & James R. Markusen, 2007. "Export-Platform Foreign Direct Investment," Journal of the European Economic Association, MIT Press, vol. 5(4), pages 776-795, 06.
  5. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  6. Glass, Amy Jocelyn & Saggi, Kamal, 1999. "FDI policies under shared factor markets," Journal of International Economics, Elsevier, vol. 49(2), pages 309-332, December.
  7. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  8. Levinsohn, James A., 1989. "Strategic trade policy when firms can invest abroad: When are tariffs and quotas equivalent?," Journal of International Economics, Elsevier, vol. 27(1-2), pages 129-146, August.
  9. Klein, Michael W. & Rosengren, Eric, 1994. "The real exchange rate and foreign direct investment in the United States : Relative wealth vs. relative wage effects," Journal of International Economics, Elsevier, vol. 36(3-4), pages 373-389, May.
  10. Laixun Zhao & Yuqing Xing, 2006. "Global Production and Currency Devaluation," Review of International Economics, Wiley Blackwell, vol. 14(2), pages 202-211, 05.
  11. Laixun Zhao & Yuqing Xing, 2003. "Currency Devaluation and Global Outsourcing," Working Papers EMS_2003_04, Research Institute, International University of Japan.
  12. Goldberg, Linda S & Kolstad, Charles D, 1995. "Foreign Direct Investment, Exchange Rate Variability and Demand Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 855-73, November.
  13. Cushman, David O, 1985. "Real Exchange Rate Risk, Expectations, and the Level of Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 297-308, May.
  14. James R. Markusen & Anthony J. Venables, 1995. "Multinational Firms and The New Trade Theory," NBER Working Papers 5036, National Bureau of Economic Research, Inc.
  15. Cheng, Leonard K. & Kwan, Yum K., 2000. "What are the determinants of the location of foreign direct investment? The Chinese experience," Journal of International Economics, Elsevier, vol. 51(2), pages 379-400, August.
  16. Ethier, Wilfred J, 1986. "The Multinational Firm," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 805-33, November.
  17. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
  18. Froot, Kenneth A & Stein, Jeremy C, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1191-217, November.
  19. Fung, K. C. & Lau, Lawrence J., 2001. "New Estimates of the United States-China BilateralTrade Balances," Journal of the Japanese and International Economies, Elsevier, vol. 15(1), pages 102-130, March.
  20. Kozo Kiyota & Shujiro Urata, 2004. "Exchange Rate, Exchange Rate Volatility and Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 27(10), pages 1501-1536, November.
  21. Theresa Greaney, 2002. "Reverse Importing and Asymmetric Trade and FDI: A Networks Explanation," Working Papers 200215, University of Hawaii at Manoa, Department of Economics.
  22. Leonard Cheng, 1985. "Comparing Bertrand and Cournot Equilibria: A Geometric Approach," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 146-152, Spring.
  23. Kevin Honglin Zhang, 2001. "What Attracts Foreign Multinational Corporations To China?," Contemporary Economic Policy, Western Economic Association International, vol. 19(3), pages 336-346, 07.
  24. Lee G. Branstetter & Robert C. Feenstra, 1999. "Trade and Foreign Direct Investment in China: A Political Economy Approach," NBER Working Papers 7100, National Bureau of Economic Research, Inc.
  25. Helpman, Elhanan, 1985. "Multinational Corporations and Trade Structure," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 443-57, July.
  26. John Henley & Colin Kirkpatrick & Georgina Wilde, 1999. "Foreign Direct Investment in China: Recent Trends and Current Policy Issues," The World Economy, Wiley Blackwell, vol. 22(2), pages 223-243, 03.
  27. Dei, Fumio, 1990. "A note on multinational corporations in a model of reciprocal dumping," Journal of International Economics, Elsevier, vol. 29(1-2), pages 161-171, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:japwor:v:20:y:2008:i:2:p:275-289. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.