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Foreign direct investment and exchange rate regimes

  • Busse, Matthias
  • Hefeker, Carsten
  • Nelgen, Signe

The paper uses a comprehensive data set with bilateral direct investment flows and establishes the influence of the de-facto exchange rate regime for FDI flows. We find a strong and significant effect from fixed rates on bilateral FDI flows in developed economies, but no significant effect for developing countries. There is thus no general and uniform impact of stable exchange rates on FDI. We provide several possible explanations for this difference.

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Paper provided by Hamburg Institute of International Economics (HWWI) in its series HWWI Research Papers with number 2-17.

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Date of creation: 2010
Date of revision:
Handle: RePEc:zbw:hwwirp:2-17
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