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Exchange rate, distribution, and outward direct investment

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  • Tian, Wei

Abstract

This paper examines the impact of exchange rate movements on firm outward direct investment (ODI), by taking into account the heterogeneous effects between distribution and production ODI. Overall, homecurrency depreciation tends to increase ODI due, in large part, to the growing emergence of distribution ODI as predicted by a theoretical model. Using rich Chinese firm-level ODI decision data over the period between 2000 and 2008, the intensive empirical search shows strong supports to the model prediction on the complementary relationship between distribution ODI and export. In response to home depreciation, Chinese firms set up more distribution trade affiliates to promote exports. Such results are robust to different econometric methodologies, empirical specifications, and time spans.

Suggested Citation

  • Tian, Wei, 2024. "Exchange rate, distribution, and outward direct investment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:intfin:v:93:y:2024:i:c:s1042443124000635
    DOI: 10.1016/j.intfin.2024.101997
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    More about this item

    Keywords

    Outward direct investment; Exchange rate; Distribution ODI;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance
    • D0 - Microeconomics - - General
    • L8 - Industrial Organization - - Industry Studies: Services

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