Foreign Direct Investment, Trade and Exchange Rate Volatility

The desire of firms' to enhance their global presence, diversify their production and the interest of policymakers to augment domestic production with more efficient foreign technology has contributed to a surge in the cross border flow of capital. By taking into account market characteristics such as market maturity and export platform status of Japanese FDI hosts during the 1990s, this dissertation examines the link between FDI, trade and exchange rate volatility. More specifically, the following questions are addressed: What induces multinational firms to reach diverse destinations? Which of the host country characteristics attract investing firms most? Are trade flows among partners related to the volume of FDI flows between them? What does the geographical distribution of FDI reflect: efficiency, technological advances, or liberalization of trade and FDI policies? Given the diminishing role of the traditional FDI driving factors (such as factor abundance and cheap labor), to what extent do market maturity, export platform status and size of the host nations matter in determining the inflow of FDI?

Autorentext

Dr. Tadesse is an Associate Professor of Economics at the University of Minnesota Duluth, USA. He received his B.Sc. from Ethiopia, M.Sc. from India, and Ph.D. from the USA. Dr. Tadesse's research focuses on international economics, econometrics and development economics. His publications have appeared in several economics journals.

Klappentext

The desire of firms to enhance their global presence, diversify their production and the interest of policymakers to augment domestic production with more efficient foreign technology has contributed to a surge in the cross border flow of capital. By taking into account market characteristics such as market maturity and export platform status of Japanese FDI hosts during the 1990s, this dissertation examines the link between FDI, trade and exchange rate volatility. More specifically, the following questions are addressed: What induces multinational firms to reach diverse destinations? Which of the host country characteristics attract investing firms most? Are trade flows among partners related to the volume of FDI flows between them? What does the geographical distribution of FDI reflect: efficiency, technological advances, or liberalization of trade and FDI policies? Given the diminishing role of the traditional FDI driving factors (such as factor abundance and cheap labor), to what extent do market maturity, export platform status and size of the host nations matter in determining the inflow of FDI?