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.

Comments

Accepted version. International Trade Journal, Vol. 22, No. 2 (April-June 2008): 218-245. DOI. © Taylor & Francis 2008. Used with permission.

Abdur Chowdhury was the Director of the United Nations Economic Commission in Geneva, Switzerland at the time of publication.

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Economics Commons

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