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

Glauco De Vita, Andrew Abbott

Research output: Contribution to journalArticle

10 Citations (Scopus)

Abstract

This article 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 1975–2001. We use both fixed effects and dynamic generalized 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.
Original languageEnglish
Pages (from-to)2553-2564
Number of pages12
JournalApplied Economics
Volume39
Issue number20
DOIs
Publication statusPublished - 2007

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