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Exchange Rates and Competition for FDI

Author

Listed:
  • Yuqing Xing
  • Guanghua Wan

Abstract

This paper analyses the role of exchange rates in the competition for FDI. Based on the assumption that two countries compete for FDI from the same source country, the paper shows explicitly that the relative FDI of one country is determined by the relative real exchange rate between its currency and that of the source country. The theoretical result suggests that, if the currency of one FDI recipient country appreciates against the source country more than that of its rival, its FDI inflows will decrease while the competing country's FDI will increase.

Suggested Citation

  • Yuqing Xing & Guanghua Wan, 2004. "Exchange Rates and Competition for FDI," WIDER Working Paper Series RP2004-64, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:rp2004-64
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    File URL: https://www.wider.unu.edu/sites/default/files/rp2004-064.pdf
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    References listed on IDEAS

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    Cited by:

    1. Shauna Phillips & Fredoun Z. Ahmadi-Esfahani, 2008. "Exchange rates and foreign direct investment: theoretical models and empirical evidence ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(4), pages 505-525, December.
    2. Kandogan, Yener, 2012. "Regional foreign direct investment potential of the states within the US," Journal of Economics and Business, Elsevier, vol. 64(4), pages 306-322.
    3. Grahame Fallon & Mark Cook, 2010. "Exploring the Regional Distribution of Inbound Foreign Direct Investment in the UK in Theory and Practice: Evidence from a Five-Region Study," Regional Studies, Taylor & Francis Journals, vol. 44(3), pages 337-353.
    4. Phillips, Shauna & Ahmadi-Esfahani, Fredoun Z., 2008. "Exchange Rates and Foreign Direct Investment: Theoretical Models and Empirical Evidence," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 1-21.

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