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The U.S. Productivity Figures and Foreign Direct Investment in Japan

Author

Listed:
  • Benjamin Adam Abugri

    (Department of Economics and Finance, The University of Texas-Pan American, USA)

  • Gökçe A. Soydemir

    (Department of Economics and Finance, The University of Texas-Pan American, USA)

Abstract

In this paper, we present empirical evidence linking the movements in the U.S. $/Yen exchange rate and the U.S. productivity figures to the U.S. outbound foreign direct investment (FDI) in Japan by constructing a five variable vector autoregressive (VAR) model. Our results show a lagged and statistically significant negative response of the U.S. FDI to a one standard deviation increase in the U.S. productivity figures. We further find that a once and for all appreciation in the U.S. dollar increases the U.S. FDI in Japan which is consistent with the earlier findings in the literature. The U.S. export figures, however, are found to serve as a complement to the U.S. outbound FDI whereas the impact of the U.S. imports from Japan on the U.S. outbound FDI is found to be negative. The results support the view that a productivity increase in the U.S. decreases the amount of the U.S. outbound foreign direct investment in the long run.

Suggested Citation

  • Benjamin Adam Abugri & Gökçe A. Soydemir, 2002. "The U.S. Productivity Figures and Foreign Direct Investment in Japan," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 53-69.
    • Handle: RePEc:wsi:rpbfmp:v:05:y:2002:i:01:n:s0219091502000699
    DOI: 10.1142/S0219091502000699
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    Citations

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    Cited by:

    1. Grossmann, Axel & Simpson, Marc W. & Brown, Cynthia J., 2009. "The impact of deviation from relative purchasing power parity equilibrium on U.S. foreign direct investment," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 521-550, May.

    More about this item

    Keywords

    U.S. Productivity; Foreign Direct Investments; Exchange Rates and VAR Model;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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