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Exchange Rate as a Determinant of Foreign Direct Investment: Does it Really Matter? Theorical Aspects, Literature Review and Applied Proposal

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  • Isabel Cristina Ruiz

Abstract

This paper re-examines the role of exchange rates as determinantof FDI. It extends the analysis to include the issue of how exchange rates determinethe decision of invest in one country depending on whether the firm is deciding toinvest on the country to service the local market or to invest on the country in orderto re-export. This paper offers a broad literature review of the state of the empiricalresearch in order to draw conclusions of the real importance of the exchange rateas a determinant of FDI. Details of FDI current behavior in Latin American aredescribed and I propose a model of FDI to be applied for these countries. Datasources are given.

Suggested Citation

  • Isabel Cristina Ruiz, 2005. "Exchange Rate as a Determinant of Foreign Direct Investment: Does it Really Matter? Theorical Aspects, Literature Review and Applied Proposal," Documentos de Trabajo de Valor Público 5431, Universidad EAFIT.
    • Handle: RePEc:col:000122:005431
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    File URL: http://www.eafit.edu.co/NR/rdonlyres/FEDF714A-FEB4-4A77-9CC3-EB65B03BCBE1/0/Art6IsabelRuiz.pdf
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    Citations

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    Cited by:

    1. Anthony Enisan Akinlo & Olufemi Gbenga Onatunji, 2021. "Exchange Rate Volatility And Foreign Direct Investment In Selected West African Countries," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 15(1), pages 77-88.

    More about this item

    Keywords

    FDI; Exchange Rate; Exchange Rate Variability.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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