he Impact of Real Exchange Rates on Japanese Direct Investment in China's Manufacturing: An Empirical Assessment
This paper analyzes the role of real exchange rate in determining Japanese FDI in China. Using the data of Japanese direct investment in China's nine major manufacturing sectors from 1989 to 2000, the paper conducts regression analysis with both time series and panel data. The empirical results show that there exists a significantly positive correlation between the bilateral real exchange rate and the inflows of Japanese direct investment to China. Specifically, the appreciation of Yen generally stimulated the inflows of Japanese direct investment while the depreciation of Yen leading to a decrease of the investment. To a large extent, the rise and fall of Japanese direct investment in China over the period is attributed to the fluctuations of the bilateral real exchange rate. As the sharp devaluation of Yuan in early 1990s was triggered by merging China's official exchange rate with market rates, the policy shift on the exchange rate regime should be credited for the surge of FDI inflows.
|Date of creation:||Nov 2002|
|Date of revision:|
|Contact details of provider:|| Postal: 777 Kokusai-cho, Minami Uonuma0-shi, Niigata 949-7277 JAPAN|
Web page: http://www.iuj.ac.jp/research/
More information through EDIRC
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.:
- Kojima, Kiyoshi, 1982. "Macroeconomic versus International Business Approach to Direct Foreign Investment," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 23(1), pages 1-19, June.
- 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.
- Chien-Hsun Chen, 1996. "Regional determinants of foreign direct investment in mainland China," Journal of Economic Studies, Emerald Group Publishing, vol. 23(2), pages 18-30, May.
- Gabrielle Lipworth & Tamim Bayoumi, 1997.
"Japanese Foreign Direct Investment and Regional Trade,"
IMF Working Papers
97/103, International Monetary Fund.
- Bayoumi, Tamim & Lipworth, Gabrielle, 1998. "Japanese foreign direct investment and regional trade," Journal of Asian Economics, Elsevier, vol. 9(4), pages 581-607.
- Dewenter, Kathryn L, 1995. "Do Exchange Rate Changes Drive Foreign Direct Investment?," The Journal of Business, University of Chicago Press, vol. 68(3), pages 405-33, July.
When requesting a correction, please mention this item's handle: RePEc:iuj:wpaper:ems_2002_05. 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: (Kazumi Imai, Office of Academic Affairs)
If references are entirely missing, you can add them using this form.