Common currencies and FDI flows

Arbeitspapier

The paper investigates the impact of EMU on foreign direct investment flows. Using the option value approach to investment decisions, it is possible to show how exchange rate uncertainty hinders cross-border investment flows. By permanently fixing bilateral exchange rates, a currency union can then be expected to spur international investment. Results from a gravity model on a sample of OECD countries confirm the hypothesis that currency unions have a positive impact on FDI; moreover, adopting the same currency appears to do more than merely eliminating exchange rate volatility. These findings closely resemble those recently obtained in the trade literature.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: LEM Working Paper Series ; No. 2005/07

Classification and Topics

• Classification: Wirtschaft ; Economic Integration ; International Investment; Long-term Capital Movements
• Subject: Eurozone ; Auslandsinvestition ; Optimaler Währungsraum ; Gravitationsmodell ; EU-Staaten ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schiavo, Stefano
• Event: Veröffentlichung
• (who): Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM)
• (where): Pisa
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/89515
• Last update: 10.03.2025, 11:41 AM CET