The Impact of Exchange Rate Volatility on Foreign Direct Investment

BUSE, Oana Bianca (2012) The Impact of Exchange Rate Volatility on Foreign Direct Investment. [Dissertation (University of Nottingham only)] (Unpublished)

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This study investigates the impact of exchange rate volatility on the level of foreign direct

investment inflows in the Unites States of America, the United Kingdom, Canada and Japan, using

annual data starting from 1975 to 2011. Exchange rate volatility has been measured using four

different methods: a classic standard deviation, a moving mean difference value of the exchange

rate fluctuations, a moving average standard deviation with a 3-year window and, finally, using a

GARCH(1,1) model. The data was accounted for serial correlation, nonstationarity and cointegration

and the relationship between inward FDI flows (expressed as a percentage of GDP for each country)

and exchange rate volatility has been analyzed using OLS regressions and a panel data model, as well

as an error correction model to investigate the existence of a short-term relationship between the

two variables. While OLS estimates have shown that FDI inflows in three out of the four countries

analyzed are influenced by exchange rate volatility, no evident link between the two variables has

been found in the panel data analysis. In general, the mixed results obtained are proof that the

existence of a relationship between FDI inflows and exchange rate volatility varies across countries

and between different econometric models employed.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 08 Apr 2013 10:33
Last Modified: 23 Oct 2016 04:21

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