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Do exchange rates have any impact upon UK inward foreign direct investment?

[journal article]

Abbott, Andrew James; De Vita, Glauco

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Abstract This paper examines the impact of the level and volatility of the real exchange rate on UK foreign direct investment (FDI) inflows from the seven major countries of origin of the investment over the period 1975 to 2001. We use both fixed effects and dynamic generalised methods of moments (GMM) panel estimation techniques, and manufacturing data disaggregated by high and low R&D content of the sector of destination. Our results provide strong evidence that exchange rate volatility has a negative impact on FDI flows into the UK, irrespective of the sector of destination of the investment. On the other hand, the level of the real exchange rate is found to have a statistically insignificant effect on FDI after controlling for endogeneity of the regressors.
Document language English
Publication Year 2008
Page/Pages p. 2553-2564
Journal Applied Economics, 39 (2008) 20
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)