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Article: Reports from M. Udomkerdmongkol and colleagues advance knowledge in development economics.
- Article from:
- Economics Week
- Article date:
- November 20, 2009
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According to recent research published in the journal Review of Development Economics, "This paper investigates the effect of exchange rates on US foreign direct investment (FDI) flows to a sample of 16 emerging market countries using annual panel data for the period 1990-2002."
"Three separate exchange rate effects are considered: the value of the local currency (a cheaper currency attracts FDI); expected changes in the exchange rate (expected devaluation implies FDI is postponed); and exchange rate volatility (discourages FDI). a negative relationship between FDI and more expensive local currency, the expectation of local currency depreciation, and volatile ...