The endogeneity of the exchange rate as a determinant of FDI: A model of entry and multinational firms [An article from: Journal of International Economics]

This digital document is a journal article from Journal of International Economics, published by Elsevier in 2007. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
This paper argues that when the exchange rate and projected sales in the host country are jointly determined by underlying macroeconomic variables, regressions of FDI flows on both exchange rate levels and volatility are subject to bias. The results demonstrate that a multinational firm's response to exchange rate volatility will differ depending on whether the volatility arises from shocks in the firm's native or host country. It is the first study to depart from the representative-firm framework in an analysis of direct investment behavior with money.