Impact of an unexplained component of real exchange rate volatility on FDI: Evidence from transition countries

Balaban, Suzana; Živkov, Dejan; Milenković, Ivan

doi:10.1016/j.ecosys.2019.100719

Cited by 11 publications

(9 citation statements)

References 44 publications

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“…The overall effect is that the volatility of the domestic exchange rate automatically triggers “the option to wait” on future investments leading to the observed negative relationship between FDI and the domestic EXRV . Our results support earlier studies that have found domestic EXRV to discourage FDI inflows (Asamoah et al., 2016; Balaban et al., 2019; Cavallari & d'Addona, 2013; Dal Bianco & Loan, 2017; Jehan & Hamid, 2017). However, not all studies are in tandem with our results as it contradicts studies that have found no significant impact of exchange rate volatility on FDI inflows (Abbot et al, 2012; Chowdhury & Wheeler, 2015; Dhakal et al., 2010).…”

Section: Regression Resultssupporting

confidence: 92%

“…FDI inflows (Asamoah et al, 2016;Balaban et al, 2019;Cavallari & d'Addona, 2013;Dal Bianco & Loan, 2017;Jehan & Hamid, 2017). However, not all studies are in tandem with our results as it contradicts studies that have found no significant impact of exchange rate volatility on FDI inflows (Abbot et al, 2012;Chowdhury & Wheeler, 2015;Dhakal et al, 2010).…”

Section: Notesmentioning

confidence: 99%

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Exchange rate uncertainty and foreign direct investment in Africa: Does financial development matter?

Asamoah

Alagidede

Adu

2022

Review Development Economics

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The orthodox view is that uncertainty deters investments and, by extension, private capital inflows. Paying specific attention to the volatility of the domestic exchange rate, foreign direct investment (FDI), and financial development indicators, this study investigates the impact of exchange rate uncertainty on FDI and whether financial development matters in such association. We establish our empirical relationship with a system general methods of moments (GMM) two‐step robust estimator with orthogonal deviations. We found evidence supporting a nonlinear U‐shaped relationship between uncertainty and FDI and that the impact of uncertainty on FDI depends on varying levels of uncertainty. We also document that uncertainty deters FDI flows and that countries with a well‐functioning financial development can transform the adverse impact of volatility on FDI. However, curbing the adverse effect depends on the specific indicator and the threshold value of financial development (financial institutions or financial markets).

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Section: Regression Resultssupporting

confidence: 92%

Section: Notesmentioning

confidence: 99%

Exchange rate uncertainty and foreign direct investment in Africa: Does financial development matter?

Asamoah

Alagidede

Adu

2022

Review Development Economics

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“…They also concluded that there is a relationship between the nature of the exchange rate regime and the quality of decision-making in monetary management. The paper (Balaban et al, 2019) notes the negative impact of exchange rate volatility on overall economic development and foreign direct investment in Central and Eastern European countries.…”

Section: Exchange Rate and Exchange Rate Policymentioning

confidence: 99%

Five Years of Inflation Targeting Without Economic Growth: What Should Be Changed? The Case of Russia

Gasanov

2021

IJFR

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The article provides a review of approaches to assessing and analyzing the effectiveness of the interest rate and exchange rate policy of the Bank of Russia in the period 2015-2019. Despite the decrease in the rate of price growth, inflationary expectations of economic agents remain at a high level. Monetary policy continues to be tight. The stability of the exchange rate to external shocks, expected from the introduction of inflation targeting and a free floating rate, did not happen. The complex of conditions that have developed due to geopolitical factors, low growth rates and the global economic crisis caused by the coronavirus pandemic require the search for new targets, such as economic growth and exchange rate stability. To maintain the stability of the ruble exchange rate, it is recommended to sell foreign exchange reserves accumulated according to the "Budget rule" in an equivalent amount; to support the liquidity of banks during periods of an attack on the ruble, it should through foreign exchange REPO, and develop a derivatives market.

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“…Foreign direct investment (FDI) as an economic phenomenon has in last few decades overseen transfer of technology, skills, and economic progress (Balaban, Živkov, & Milenković, 2019; Buckley & Munjal, 2017; Iwasaki & Tokunaga, 2016; Li & Yang, 2020; Rojec, 2019; Šušteršič & Kejžar, 2020; Talbi, Jebli, Bashir, & Shahzad, 2020). Although it has created significant economic impact, we are yet to link FDI with economic changes in emerging economies, who are blessed with abundant natural resources (Ndikumana & Sarr, 2019; Pan, 2017; Zhao, Wong, Wong, & Jiang, 2020).…”

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

China's quest for economic dominance and energy consumption: Can Asian economies provide natural resources for the success of One Belt One Road?

Bashir

Shahzad

et al. 2020

Manage Decis Econ

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This research extends the research into foreign direct investments (FDIs) from emerging economies by integrating locational advantage perspective and institution‐based view to empirically analyze the interactive effect of resource endowment in a host economy and how institutional regulations impact on location choice of investors from emerging economies. Our analysis is based on Chinese outward FDI in 36 Asian and Oceanian economies. Empirical findings indicate that resource endowment is contingent upon regulatory institutions from both home and host country settings. Whereas the political risk bears positive influence over FDI and resource endowment, institutional distance and economic freedom have negative impact, which indicates that resource endowment is more appealing to investments from Chinese firms when institutional distance and economic freedom are low and political risk is high.

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Impact of an unexplained component of real exchange rate volatility on FDI: Evidence from transition countries

Cited by 11 publications

References 44 publications

Exchange rate uncertainty and foreign direct investment in Africa: Does financial development matter?

Exchange rate uncertainty and foreign direct investment in Africa: Does financial development matter?

Five Years of Inflation Targeting Without Economic Growth: What Should Be Changed? The Case of Russia

China's quest for economic dominance and energy consumption: Can Asian economies provide natural resources for the success of One Belt One Road?

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