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Does Real Exchange Rate Volatility Affect Foreign Direct Investment? Evidence From Four Developed Countries, Abdur Chowdhury, Mark Wheeler
Does Real Exchange Rate Volatility Affect Foreign Direct Investment? Evidence From Four Developed Countries, Abdur Chowdhury, Mark Wheeler
Abdur R. Chowdhury
This study examines the impact of shocks to exchange rate uncertainty (volatility) on foreign direct investment (FDI) in Canada, Japan, the United Kingdom, and the United States. The analysis is conducted using vector autoregressive models that contain the price level, real output, the real exchange rate, the volatility of the real exchange rate, the interest rate, and FDI. The results from variance decompositions yield public policy implications. In Canada, Japan, and the United States, innovations to exchange rate uncertainty explain significant portions of the forecast error variance in FDI at longer time horizons. The impulse response functions indicate that, to …
Fdi And Growth: What Causes What?, Abdur Chowdhury, George Mavrotas
Fdi And Growth: What Causes What?, Abdur Chowdhury, George Mavrotas
Abdur R. Chowdhury
This paper examines the causal relationship between FDI and economic growth by using an innovative econometric methodology to study the direction of causality between the two variables. We apply our methodology, based on the Toda-Yamamoto test for causality, to time-series data covering the period 1969–2000 for three developing countries, namely Chile, Malaysia and Thailand, all of them major recipients of FDI with a different history of macroeconomic episodes, policy regimes and growth patterns. Our empirical findings clearly suggest that it is GDP that causes FDI in the case of Chile and not vice versa, while for both Malaysia and Thailand, …