Document Type
Article
Language
eng
Format of Original
28 p.
Publication Date
4-2008
Publisher
Taylor & Francis (Routledge)
Source Publication
The International Trade Journal
Source ISSN
0885-3908
Original Item ID
DOI: 10.1080/08853900801970601
Abstract
This study examines the impact of shocks to exchange rate uncertainty (volatility) on foreign direct investment (FDI) in Canada, Japan, the United Kingdom, and the United States. The analysis is conducted using vector autoregressive models that contain the price level, real output, the real exchange rate, the volatility of the real exchange rate, the interest rate, and FDI. The results from variance decompositions yield public policy implications. In Canada, Japan, and the United States, innovations to exchange rate uncertainty explain significant portions of the forecast error variance in FDI at longer time horizons. The impulse response functions indicate that, to the extent that shocks to exchange rate volatility have an impact on FDI, the impact is positive and takes place with a lag.
Recommended Citation
Chowdhury, Abdur and Wheeler, Mark, "Does Real Exchange Rate Volatility Affect Foreign Direct Investment? Evidence from Four Developed Economies" (2008). Economics Faculty Research and Publications. 18.
https://epublications.marquette.edu/econ_fac/18
Comments
Accepted version. International Trade Journal, Vol. 22, No. 2 (April-June 2008): 218-245. DOI. © 2008 Taylor & Francis. Used with permission.
Abdur Chowdhury was the Director of the United Nations Economic Commission in Geneva, Switzerland at the time of publication.