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Entry by Foreign Firms in the United States Under Exchange Rate Uncertainty
José Manuel Campa
The Review of Economics and Statistics
Vol. 75, No. 4 (Nov., 1993), pp. 614-622
Published by: The MIT Press
Stable URL: http://www.jstor.org/stable/2110014
Page Count: 9
You can always find the topics here!Topics: Exchange rates, Financial investments, Sunk costs, Investment risk, Industrial market, Economic uncertainty, Foreign investments, Foreign direct investments, Investment decisions, Business structures
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This paper tests the effects that real exchange rate fluctuations had on foreign direct investment into the United States during the 1980s. Using a sample of foreign investments in 61 four-digit SIC U.S. wholesale industries, this paper finds exchange rate volatility to be negatively correlated with the number of foreign investments that occur in these industries. This negative effect is most pronounced for industries where sunk investments in physical and intangible assets are relatively high. Although exchange rate volatility deters investment from all countries, its effect was most significant for investments by Japanese companies.
The Review of Economics and Statistics © 1993 The MIT Press