The Effect of Currency Crises on Foreign Direct Investment Activity in Emerging Markets

Despite the ample literature on currency crises, the effect of currency crises on foreign direct investment FDI activity has been largely unexamined. This paper tests the sensitivity of three measures of U.S. outbound non-bank FDI activity to currency crises in 21 emerging economies. The findings of this analysis suggest that contrary to the common perception, currency crises do not seem to have a negative effect on FDI activity in the crisis economy. Indeed, we find some evidence that currency crises may increase FDI activity in the affected country. These results underline the stable nature of FDI relative to other types of international capital flows and as a safer mode of financing for emerging economies.


Issue Date:
2005
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/50276
Published in:
Review of Applied Economics, Volume 01, Number 2
Page range:
255-272
Total Pages:
18
JEL Codes:
F21; F31




 Record created 2017-04-01, last modified 2017-08-22

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