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A fresh assessment of the euro effect on outward US FDI

Author

Listed:
  • Mariam Camarero

    (University Jaume I and INTECO, Department of Economics, Campus de Riu Sec, E-12080 Castellón, Spain.)

  • Sergi Moliner

    (University Jaume I and INTECO, Department of Economics, Campus de Riu Sec, E-12080 Castellón, Spain.)

  • Cecilio Tamarit

    (University of València and INTECO, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building E-46022 Valencia, Spain.)

Abstract

This paper analyzes the potential determinants of the US stock of outward FDI (OFDI). As our research question is whether the introduction of the euro has changed the pattern of US OFDI, we consider a large group of host countries from different continents, zooming in on the European case, where we analyze different country groupings for the European Union and the Euro Area. With this aim, we estimate a gravity equation using the Pseudo Poisson Maximum Likelihood (PPML) estimator. Furthermore, we use the Bayesian Modelling Averaging (BMA) analysis results in Camarero et al. (2021) as a benchmark for the initial specification. We find that US OFDI is explained by horizontal and vertical FDI motives in all country groups. As for the euro effect, we show that the single currency has prominently promoted US OFDI to the EA members with effects ranging between 10% and 20%. However, while in the core Euro Area, the euro has favored both HFDI and intra-industry VFDI strategies, in the periphery has mainly stimulated pure VFDI.

Suggested Citation

  • Mariam Camarero & Sergi Moliner & Cecilio Tamarit, 2022. "A fresh assessment of the euro effect on outward US FDI," Working Papers 2209, Department of Applied Economics II, Universidad de Valencia.
    • Handle: RePEc:eec:wpaper:2209
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    References listed on IDEAS

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    More about this item

    Keywords

    FDI determinants; US; European Union; BMA; PPML;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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