Exchange Rate Volatility And Fdi
INTRODUCTION
Foreign Direct Investment brings various benefits to both investing countries, or home countries, and recipient countries, or host countries. FDI transfers not only financial resources, but also technology and managerial know-how from home countries to host countries. Therefore, FDI are very important for developing countries, or emerging markets, to grow such as G.C.C countries and some Asian countries. For this reason, I tried to study the relationship between FDI and exchange rate volatility and observe how exchange rate changeability could affect the FDI positively or negatively. In this paper, I have chosen five academic papers which are related to FDI and currency exchange rate variability and I tried to present them in the following: (1) Exchange Rate, Exchange Rate Volatility and Foreign Direct Investment, (2) Untying the Gordian knot: The Multiple Links Between Exchange Rates and Foreign Direct Investment, (3) Exchange Rate Volatility and Foreign Direct Investment, (4) Why is China so Attractive for FDI? (5)The Role of Exchange Rates, Exchange Rate Volatility and Foreign Investment: International Evidence.
Exchange Rate, Exchange Rate Volatility and Foreign Direct Investment
By: Kozo Kiyota and Shujiro Urata
Literature review
Several empirical studies confirmed the strong impacts of exchange rate on FDI. Yoshimura and Kiyota (2003) examined the impacts of exchange rate on Japan’s FDI for different periods. These studies exposed that the appreciation of the home currency vis-à-vis the host currency encouraged FDI from the home country to the host country. Bénassy-Quéré, Fontagné and Lahrèche- Révil (2001) investigated the impacts of exchange rate volatility, which was measured by the coefficient of variation of quarterly nominal exchange rate over the past three years, on FDI from developed to developing countries for the 1984–96 periods by using annual data. They found that...
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