The Impact of Exchange Rate Volatility on Us Direct Investment

18 Pages Posted: 8 Feb 2003

See all articles by Holger Görg

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Katharine Wakelin

University of Nottingham - School of Economics

Abstract

In this paper we examine the impact of the level of the exchange rate, volatility in the exchange rate and exchange rate expectations on outward US foreign direct investment in 12 developed countries and inward foreign direct investment to the USA from those countries for the period from 1983 to 1995. In our empirical analysis we find no evidence for an effect of exchange rate variation on either US outward investment or inward investment in the USA. This result is robust to a number of different estimation procedures. As regards the level of the exchange rate we find a positive relationship between US outward investment and appreciation in the host country currency while there is a negative relationship between US inward investment and appreciation in the dollar.

Suggested Citation

Gorg, Holger and Wakelin, Katharine, The Impact of Exchange Rate Volatility on Us Direct Investment. The Manchester School, Vol. 70, pp. 380-397, 2002. Available at SSRN: https://ssrn.com/abstract=320685

Holger Gorg (Contact Author)

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Katharine Wakelin

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 951 4734 (Phone)
+44 115 951 4159 (Fax)

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