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Exchange Rates and U.S. Direct Investment into Latin America

Author

Listed:
  • Isabel Ruiz

    () (Department of Economics and International Business, Sam Houston State University)

  • Susan Pozo

    () (Department of Economics, Western Michigan University)

Abstract

This paper analyzes the impact of exchange rate levels and exchange rate uncertainty on U.S. foreign direct investment into Latin America. By decomposing exchange rate uncertainty into temporary (short-run) and permanent (long-run) components, we further explore whether the nature of uncertainty matters. Our empirical findings support the view that exchange rate uncertainty has a negative impact on U.S. investment flows into Latin America. Moreover, it is the persistency in uncertainty rather than transitory uncertainty that mostly deters foreign investment. In contrast, investors do not appear to be affected by discrete movements in exchange rate levels.

Suggested Citation

  • Isabel Ruiz & Susan Pozo, 2007. "Exchange Rates and U.S. Direct Investment into Latin America," Working Papers 0701, Sam Houston State University, Department of Economics and International Business.
  • Handle: RePEc:shs:wpaper:0701
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    File URL: http://www.shsu.edu/academics/economics-and-international-business/documents/wp_series/wp07-01.pdf
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    References listed on IDEAS

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    1. Engle, Robert F. & White (the late), Halbert (ed.), 1999. "Cointegration, Causality, and Forecasting: Festschrift in Honour of Clive W. J. Granger," OUP Catalogue, Oxford University Press, number 9780198296836.
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    Cited by:

    1. Diego Escobari & Diego E. Vacaflores, 2015. "Expectations and the Dynamic Feedback between Foreign Direct Investment and Economic Growth," International Economic Journal, Taylor & Francis Journals, vol. 29(1), pages 121-136, March.
    2. repec:spr:portec:v:16:y:2017:i:3:d:10.1007_s10258-017-0136-y is not listed on IDEAS
    3. Maroula Khraiche & Jeffrey Gaudette, 2013. "FDI, Exchange Rate Volatility and Financial Development: Regional Differences In Emerging Economies," Economics Bulletin, AccessEcon, vol. 33(4), pages 3143-3156.
    4. repec:rss:jnljef:v4i6p1 is not listed on IDEAS
    5. Blanco, Luisa R., 2012. "The Spatial Interdependence of FDI in Latin America," World Development, Elsevier, vol. 40(7), pages 1337-1351.

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