IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v46y2010i3p46-58.html
   My bibliography  Save this article

Exchange Rate and Political Risks, Again

Author

Listed:
  • Gregory Clare
  • Ira N. Gang

Abstract

We examine the effects of exchange rate and political risks on foreign direct investment (FDI) for multinationals. We examine FDI by U. S. firms at two levels: in all industries and on the subset of firms in manufacturing industries. When investing in developed economies, firms appear to consider past and present variation in exchange rates. When investing in less developed nations, past and present variation does not appear to weigh as heavily as present and future variation. Decreasing political risk increases FDI.

Suggested Citation

  • Gregory Clare & Ira N. Gang, 2010. "Exchange Rate and Political Risks, Again," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(3), pages 46-58, May.
  • Handle: RePEc:mes:emfitr:v:46:y:2010:i:3:p:46-58
    as

    Download full text from publisher

    File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=VP1M818351L2H454
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gregory Clare & Ira N. Gang, 2010. "Exchange Rate and Political Risks, Again," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(3), pages 46-58, May.
    2. Benassy-Quere, AgnEs & Fontagne, Lionel & LahrEche-Revil, Amina, 2001. "Exchange-Rate Strategies in the Competition for Attracting Foreign Direct Investment," Journal of the Japanese and International Economies, Elsevier, vol. 15(2), pages 178-198, June.
    3. Michal Brzozowski, 2006. "Exchange Rate Variability and Foreign Direct Investment: Consequences of EMU Enlargement," Eastern European Economics, Taylor & Francis Journals, vol. 44(1), pages 5-24, February.
    4. Carstensen, Kai & Toubal, Farid, 2004. "Foreign direct investment in Central and Eastern European countries: a dynamic panel analysis," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 3-22, March.
    5. Marie E Wicks Kelly & George C Philippatos, 1982. "Comparative Analysis of the Foreign Investment Evaluation Practices by U.S.-Based Manufacturing Multinational Companies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 13(3), pages 19-42, September.
    6. 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 855-873, November.
    7. Busse, Matthias & Hefeker, Carsten, 2007. "Political risk, institutions and foreign direct investment," European Journal of Political Economy, Elsevier, vol. 23(2), pages 397-415, June.
    8. Douglas Nigh, 1985. "The Effect of Political Events on United States Direct Foreign Investment: A Pooled Time-Series Cross-Sectional Analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 16(1), pages 1-17, March.
    9. Biswas, Romita, 2002. "Determinants of Foreign Direct Investment," Review of Development Economics, Wiley Blackwell, vol. 6(3), pages 492-504, October.
    10. Gregory Clare, 1992. "The impact of exchange rate risk on the foreign direct investment of U.S. multinational manufacturing companies," Open Economies Review, Springer, vol. 3(2), pages 143-163, June.
    11. 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.
    12. Kazuhiro Igawa, 1983. "Some Evidences between Foreign Direct Investments and Foreign Exchange Rates: A Preliminary Note," Kobe Economic & Business Review, Research Institute for Economics & Business Administration, Kobe University, vol. 29, pages 21-32.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Deniz Ikizlerli & Numan Ülkü, 2012. "Political Risk and Foreigners' Trading: Evidence from an Emerging Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(3), pages 106-121, May.
    2. Gregory Clare & Ira N. Gang, 2010. "Exchange Rate and Political Risks, Again," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(3), pages 46-58, May.
    3. Uluc Aysun & Melanie Guldi, 2011. "Derivatives Market Activity in Emerging Markets and Exchange Rate Exposure," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(6), pages 46-67, November.
    4. Ramazan Sari & Mehmet Uzunkaya & Shawkat Hammoudeh, 2013. "The Relationship Between Disaggregated Country Risk Ratings and Stock Market Movements: An ARDL Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(1), pages 4-16, January.
    5. Ivan Deseatnicov & Hiroya Akiba, 2013. "Reconsideration of the Effects of Political Factors on FDI: Evidence from Japanese Outward FDI," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 35-48, February.
    6. Sung-Hoon Lim, 2011. "Risks in the North Korean Special Economic Zone: Context, Identification, and Assessment," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(1), pages 50-66, January.
    7. Deniz Ikizlerli & Numan Ülkü, 2012. "Political Risk and Foreigners' Trading: Evidence from an Emerging Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(3), pages 106-121, May.
    8. Sung-Hoon Lim, 2011. "Risks in the North Korean Special Economic Zone: Context, Identification, and Assessment," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(1), pages 50-66, January.
    9. Ramazan Sari & Mehmet Uzunkaya & Shawkat Hammoudeh, 2013. "The Relationship Between Disaggregated Country Risk Ratings and Stock Market Movements: An ARDL Approach," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 49(1), pages 4-16, January.
    10. Gregory Clare & Ira N. Gang, 2010. "Exchange Rate and Political Risks, Again," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 46(3), pages 46-58, May.
    11. Uluc Aysun & Melanie Guldi, 2011. "Derivatives Market Activity in Emerging Markets and Exchange Rate Exposure," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 47(6), pages 46-67, November.

    More about this item

    Keywords

    exchange rates; foreign direct investment;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:46:y:2010:i:3:p:46-58. 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: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/MREE20 .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.