Volatility, International Trade and Capital Flows

Stokman, Ad; Vlaar, Peter

doi:10.1007/978-1-4613-1271-0_7

Cited by 19 publications

(11 citation statements)

References 11 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…We found the influence of the real exchange rate on FDI to be highly instable, with a significant positive effects during some periods, and a significant negative impact on others. Also the effects of interest rates, see Stokman and Vlaar (1996), primarily representing intra-firm capital transfers, turned out to be unstable.…”

Section: The Theoretical Modelmentioning

confidence: 98%

See 1 more Smart Citation

GDP growth and currency valuation: The case of the dollar

Vlaar

2007

Journal of International Money and Finance

View full text Add to dashboard Cite

Section: The Theoretical Modelmentioning

confidence: 98%

“…In order to model the very persistent unexplained residual, d 1 was given the value 0.99. 12 19601964196819721976198419881992199620002004. US output gap according to UC method and Congressional Budget Office.…”

Section: Calibrationmentioning

confidence: 99%

GDP growth and currency valuation: The case of the dollar

Vlaar

2007

Journal of International Money and Finance

View full text Add to dashboard Cite

“…Empirically, some notable papers such as Cushman (1988), Stokman and Vlar (1996), De MÈnil (1999), Pain and Welsum (2003) find a significantly positive relationship between REER volatility and FDI inflows in the host country.…”

Section: Overview Of Literaturementioning

confidence: 99%

Real Effective Exchange Rates and Foreign Direct Investment Inflows: Empirical Evidence from India’s Sub-National Economies

Giap¹,

Gopalan²,

Luthra³

2020

JEPF

View full text Add to dashboard Cite

This paper investigates the impact of real effective exchange rates (REER), both in terms of levels and volatility, on foreign direct investment (FDI) inflows for a panel of 35 Indian sub-national economies over the period 2000-2013. In light of the asymmetric distribution of FDI inflows within India, we focus on examining the nexus between FDI inflows at the sub-national level and India’s competitiveness captured by REER. Our empirical analysis reveals that movements in REER have a significant and negative impact on FDI inflows, while REER volatility is found to be inducing FDI. Our results are suggestive that FDI inflows into India are largely domestic market oriented in nature. Purpose: In light of the asymmetric distribution of FDI inflows within India, we focus on examining the nexus between foreign direct investment (FDI) inflows at the sub-national level and India’s competitiveness captured by real effective exchange rates (REER). This paper investigates the impact of REER, both in terms of levels and volatility, on FDI inflows to 35 Indian sub-national economies over the period 2000-2013. Research Methodology: To examine the impact of REER on FDI inflows, we compile a panel dataset for 35 sub-national economies covering the time period 2000 to 2013. We employ panel fixed effects models to explore our relationship of interest between REER and FDI, controlling for other characteristics specific to a sub-national economy.Findings: Our empirical analysis reveals that movements in REER have a significant and negative impact on FDI inflows, while REER volatility is found to be inducing FDI. Our results are suggestive that FDI inflows into India are largely domestic market-oriented in nature. Originality/Value: Considering that India’s FDI inflows exhibit significant concentration patterns among selected regions, we exploit this heterogeneity at the sub-national level to empirically understand the determinants of FDI, with a particular focus on cost competitiveness as captured by REER. The extant literature has not explicitly focused on testing the impact of REER both in terms of its levels and volatility on FDI inflows to India at the sub-national level, especially not at the sub-national level. While admittedly the exchange rate varies only at the national level, the value-addition comes from understanding its interaction with state-varying macroeconomic indicators.

show abstract

“…Until recently most pointed to a positive relationship between them. For instance, Cushman (1985Cushman ( , 1988 and Stokman and Vlaar (1996) report a significant positive relationship between exchange rate volatility and the volume of FDI into and out of the United States and the Netherlands, two of the primary sources and destinations of global FDI flows. Estimating a gravity model for bilateral FDI flows between a sample of OECD countries over 1982-94, De Ménil (1999) also obtains a significant positive effect from bilateral real exchange rate volatility.…”

Section: Foreign Direct Investmentmentioning

confidence: 99%

Untying The Gordian Knot: The Multiple Links Between Exchange Rates and Foreign Direct Investment

Pain

Welsum

2003

J of Common Market Studies

View full text Add to dashboard Cite

Theoretical and empirical studies show that the level and volatility of exchange rates can have significant effects on foreign direct investment (FDI). But the evidence is ambiguous, with the impact of exchange rates being heterogeneous across countries and types of investment, and varying over time. Fixed exchange rate regimes may stimulate investment, but largely because of their indirect benefits for the investment climate rather than because of lower currency volatility, especially in larger economies. Careful judgements still need to be made about the appropriate entry rate, since real exchange rate levels can have a long-lasting impact on the spatial distribution of economic activities and living standards. Copyright (c) Blackwell Publishing Ltd 2003.

show abstract

Volatility, International Trade and Capital Flows

Cited by 19 publications

References 11 publications

GDP growth and currency valuation: The case of the dollar

GDP growth and currency valuation: The case of the dollar

Real Effective Exchange Rates and Foreign Direct Investment Inflows: Empirical Evidence from India’s Sub-National Economies

Untying The Gordian Knot: The Multiple Links Between Exchange Rates and Foreign Direct Investment

Contact Info

Product

Resources

About