1. Exchange Rate, Exchange Rate Volatility and Foreign Direct Investment.
- Author
-
Kiyota, Kozo and Urata, Shujiro
- Subjects
FOREIGN exchange rates ,FOREIGN investments ,MARKET volatility ,FINANCIAL markets ,MONETARY policy ,ECONOMIC development ,ECONOMIC conditions in Japan, 1989- - Abstract
In the light of the importance of foreign direct investment (FDI) for the promotion of economic development, this paper examines the impact of the changes in the real exchange rate and its volatility on FDI. Examining Japan's FDI by industries, we found that the depreciation of the currency of the host country attracted FDI, while the high volatility of the exchange rate discouraged FDI. Our results suggest the need to avoid over-valuation of the exchange rate and to maintain stable but flexible exchange rate in order to attract FDI. [ABSTRACT FROM AUTHOR]
- Published
- 2004
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