Work

Exchange Rate Strategies in the Competition for Attracting FDI

Year: 1999

Type: preprint

Abstract: Building on the needs for long term capital inflows in developing countries, this paper reconsiders the choice of an exchange-rate regime by integrating the determinants of multinational firms locations. The trade-off between price competitiveness and a stable nominal exchange rate is modeled. It is shown that exchange rate volatility is detrimental to foreign direct investment, and that its impact compares with misalignments. The main result is that the builfing of currency blocks could be a way of increasing FDI to emerging countries as a whole. The frontiers of monetary areas would then be strongly influenced by geography, as FDI is.

Source: RePEc: Research Papers in Economics

Authors: Agnès Bénassy‐Quéré, Lionel Fontagné, Amina Lahrèche‐Révil

Institutions: Paris School of Economics, Université Paris 1 Panthéon-Sorbonne

Language: English

Topic: Global Financial Crisis and Policies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W2095725776

Cites: 24

Cited by: 22

Related to: 10