Essays on the Relationships Between Foreign Direct Investment, International Trade, and Exchange Rate Volatility PDF Download
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Author: Bedassa Tadesse Ayele
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 0
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Book Description
Foreign direct investment (FDI) and international trade play key roles in enhancing global technology transfer, fostering economic growth, and the increasing integration of the global economy. A country's market maturity level and export platform status are particularly important in determining the amount of FDI andtrade that a country receives. This dissertation focuses on the host market characteristics, the FDI-trade interaction, and how exchange rate risk affects a nation's bilateral trade volume. The first essay examines whether FDI is a complement or a substitute to the bilateral trade (export sales) and the extent to which FDI-trade relationship is affected by the host's market characteristics. In addition to examining the same problem at a disaggregated industry level, the second essay examines theallocation of industry-specific manufacturing FDI across different host countries. Both essays, respectively, use country- and industry-specific Japanese bilateral trade and outward FDI (establishment counts and values) into geographically and economically diverse host nations. Results from the aggregate country-level analysis show that Japanese FDI and export sales during 1989-1999 were complementary. However, the results are sensitive to host's maturity level and export platform status. Results from industry-level analysis show that the relationship between Japanese manufacturing FDI and trade is industry specific. For example, while Japanese outward FDI complements industry specific export sales in food, beverage and tobacco industries, in wood products, furniture, and basic metal manufacturing industries, it substitutes export sales. The third essay investigates the effects of real exchange rate volatility due to shocks in both the fundamental and the microstructure component of the exchange rate on the volume of imports. Empirical results based on monthly bilateral trade data between the U.S., Canada, Germany and Hong Kong indicate that volatility in exchange rate due to shocks in the microstructure aspect of the exchange market has a trade depressing impact. The effect of volatility inthe fundamental exchange rate on the volume of trade, on the other hand, is mixed, suggesting the possibility that importers of different commodity groups treat the effect of exchange risk in the fundamental component on their trading activities differently.
Author: Bedassa Tadesse Ayele
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 0
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Book Description
Foreign direct investment (FDI) and international trade play key roles in enhancing global technology transfer, fostering economic growth, and the increasing integration of the global economy. A country's market maturity level and export platform status are particularly important in determining the amount of FDI andtrade that a country receives. This dissertation focuses on the host market characteristics, the FDI-trade interaction, and how exchange rate risk affects a nation's bilateral trade volume. The first essay examines whether FDI is a complement or a substitute to the bilateral trade (export sales) and the extent to which FDI-trade relationship is affected by the host's market characteristics. In addition to examining the same problem at a disaggregated industry level, the second essay examines theallocation of industry-specific manufacturing FDI across different host countries. Both essays, respectively, use country- and industry-specific Japanese bilateral trade and outward FDI (establishment counts and values) into geographically and economically diverse host nations. Results from the aggregate country-level analysis show that Japanese FDI and export sales during 1989-1999 were complementary. However, the results are sensitive to host's maturity level and export platform status. Results from industry-level analysis show that the relationship between Japanese manufacturing FDI and trade is industry specific. For example, while Japanese outward FDI complements industry specific export sales in food, beverage and tobacco industries, in wood products, furniture, and basic metal manufacturing industries, it substitutes export sales. The third essay investigates the effects of real exchange rate volatility due to shocks in both the fundamental and the microstructure component of the exchange rate on the volume of imports. Empirical results based on monthly bilateral trade data between the U.S., Canada, Germany and Hong Kong indicate that volatility in exchange rate due to shocks in the microstructure aspect of the exchange market has a trade depressing impact. The effect of volatility inthe fundamental exchange rate on the volume of trade, on the other hand, is mixed, suggesting the possibility that importers of different commodity groups treat the effect of exchange risk in the fundamental component on their trading activities differently.
Author: Daranee Saeju
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 262
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Book Description
Author: Bedassa Tadesse
Publisher: LAP Lambert Academic Publishing
ISBN: 9783838314914
Category : Foreign exchange rates
Languages : en
Pages : 172
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Book Description
The desire of firms' to enhance their global presence, diversify their production and the interest of policymakers to augment domestic production with more efficient foreign technology has contributed to a surge in the cross border flow of capital. By taking into account market characteristics such as market maturity and export platform status of Japanese FDI hosts during the 1990s, this dissertation examines the link between FDI, trade and exchange rate volatility. More specifically, the following questions are addressed: What induces multinational firms to reach diverse destinations? Which of the host country characteristics attract investing firms most? Are trade flows among partners related to the volume of FDI flows between them? What does the geographical distribution of FDI reflect: efficiency, technological advances, or liberalization of trade and FDI policies? Given the diminishing role of the traditional FDI driving factors (such as factor abundance and cheap labor), to what extent do market maturity, export platform status and size of the host nations matter in determining the inflow of FDI?
Author: Mr.Joshua Aizenman
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 38
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Book Description
This paper investigates the factors determining the impact of exchange rate regimes on the behavior of domestic investment and foreign direct investment (FDI). Producers may diversify internationally in order to increase the flexibility of production. We characterize the possible equilibria in a macro model that allows for the presence of a short-run Phillips curve. It is shown that a fixed exchange rate regime is more conducive to FDI relative to a flexible exchange rate, and this conclusion applies for both real and nominal shocks. If the dominant shocks are nominal (real) we will observe a negative (a positive) correlation between exchange rate volatility and the level of investment.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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It has long been observed that the change in exchange rate of a country is positively correlated with Foreign Direct Investment (FDI) inflow into its border. This thesis provides an explanation of this positive correlation, examines the implied welfare effects of short run FDI flows, and offers policy suggestions. We examine firms' cross-border production location decisions in an open-economy macroeconomic model, in which both the exchange rate and FDI flow are endogenously determined. It is argued that the change in the relative real wage caused by nominal rigidities in wage-setting is the underlying cause of the observed correlation. Furthermore, it is shown that these short run fluctuations in FDI speed up the convergence of the economy back to its long run equilibrium, but further exacerbate the inefficiencies in aggregate employments in both countries. Welfare analysis shows that when monetary volatility is sufficiently high, prohibiting FDI increases world utility. Yet the first best outcome can be achieved if long term FDI is retained, but short run variations in production location is disallowed. The theory predicts that industries characterized by wider practice of unionization and collective wage bargaining, and industries with higher labor intensities of production, should exhibit higher level of exchange rate-FDI correlations. Given that short run firm relocation is shown to magnify business cycle fluctuations, we then analyze how monetary policy can be designed to mitigate the above-mentioned inefficiency. Specifically, we examine the effects of output gap response in a Taylor-type interest rate rule. Previous literature has emphasized that, when real shocks cause the natural level of output to deviate from steady state, responding to output gap causes distortion. We show that when multinationals exist, output gap response is an effective mechanism to discourage temporary firm relocation. We compute and compare the expected world utility under different environment, and conclude that in every situation, a mild output response always improve welfare.
Author: William Allen
Publisher: Routledge
ISBN: 1134530145
Category : Business & Economics
Languages : en
Pages : 305
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Book Description
Maxwell Fry was known internationally for his research into international and domestic financial issues. This book constitutes a tribute to his pioneering work in so many areas, and draws together contributions from a range of academic and policy-making colleagues who were fortunate enough to experience the depth of knowledge and insights which Max
Author: Callye R. M. Masten
Publisher: ProQuest
ISBN: 9780549388029
Category : Foreign exchange rates
Languages : en
Pages :
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Book Description
The determinants of foreign direct investment (FDI) have been widely examined. Previous studies have shown that exchange rates play a vital role in the analysis and are a major determinant in the flow of FDI. Most research has focused on examining how exchange rate volatility affects the economies of developed nations. However, little research has been done in understanding the impact of exchange rate volatility on FDI flows to Latin America. Developing countries lack the capital that is needed for further growth. Therefore, FDI is important to developing countries, because it allows them to gain the necessary capital. This paper examines the relationship between exchange rate volatility, political institutions and FDI flows into Latin America across two sectors: food processing, and industrial manufacturing. Empirical results show that exchange rate volatility significantly deters the flow of U.S. FDI into Latin America. Other significant economic factors are U.S. interest rates and openness to trade. Conflict and corruption are the political risk factors that have significant impacts on FDI flows. Conclusions from the paper recommend governments in Latin America to implement macroeconomic polices that promote stability, which could help reduce exchange rate volatility and lower inflation.
Author: Linda S. Goldberg
Publisher:
ISBN:
Category : Demand (Economic theory)
Languages : en
Pages : 40
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Author: Shanta Parajuli
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Holger Görg
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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In this paper we examine the impact of the level of the exchange rate, volatility in the exchange rate and exchange rate expectations on outward US foreign direct investment in 12 developed countries and inward foreign direct investment to the USA from those countries for the period from 1983 to 1995. In our empirical analysis we find no evidence for an effect of exchange rate variation on either US outward investment or inward investment in the USA. This result is robust to a number of different estimation procedures. As regards the level of the exchange rate we find a positive relationship between US outward investment and appreciation in the host country currency while there is a negative relationship between US inward investment and appreciation in the dollar.
