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Author: | Chakrabarti, R. Scholnick, B. |
Title: | Exchange Rate Expectations and Foreign Direct Investment Flows |
Journal: | Weltwirtschaftliches Archiv
2002 : VOL. 138:1, p. 1-21 |
Index terms: | EXCHANGE RATES EXPECTATIONS FOREIGN INVESTMENT INVESTMENTS INVESTORS |
Freeterms: | FDI |
Language: | eng |
Abstract: | The authors use several panel data estimation techniques on data comprising exchange rate movements and FDI flows from the United States to 20 countries over a period of 14 years (most of the 1980s and the first half of the 1990s). Contrary to the authors' expectations the authors find that average devaluation in the preceding year does not have a robust positive impact on FDI flows. Results for volatility are also not robust though they are in agreement with previous studies in that increased exchange rate volatility reduces FDI flows. However, skewness of devaluations has a robust positive impact on FDI inflows. The authors view this evidence as consistent with the hypothesis that while investors adjust for small changes in exchange rates they treat relatively larger shocks differently when forming their expectations. |
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