Large Devaluations, Foreign Direct Investment and Exports : A Speculative Note

Lederman, Daniel

关键词: ASSETS;    BALANCE OF PAYMENTS;    BALANCE OF PAYMENTS CRISES;    BANK POLICY;    BASKET OF GOODS;   

DOI  :  10.1596/1813-9450-5619
RP-ID  :  WPS5619

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

One side-effect of the Global FinancialCrisis of 2008-09 was the resurgence of a debate overexchange rates. The conventional wisdom dictates thatreal-exchange rate adjustments are needed in order to bringabout changes in trade balances across countries. However,the literature on the effect of exchange rate fluctuationsand currency under-valuations on exports is surprisinglyambiguous. This note explores for the first time thepotential role of foreign direct investment as anintermediate variable in the process of trade adjustmentafter large real-exchange rate changes. Real-exchange ratedevaluations might result in increases in foreign directinvestment inflows, as investors can take advantage ofchanges in the foreign-currency value of domestic assets. Ifso, the response of exports will depend to some extent onthe nature of such foreign direct investment inflows, withinflows motivated by "horizontal" foreign directinvestment associated with negligible changes in exportgrowth after devaluation. The author utilizes quarterly dataon real effective exchange rates, foreign direct investmentinflows and exports to explore the effects of largedevaluations (defined as the largest observed quarterly realeffective exchange rate devaluation) on foreign directinvestment and exports from 1990 to 2010. The admittedlyspeculative evidence suggests that there were heterogeneousexperiences regarding the timing and magnitude of subsequentchanges in foreign direct investment and exports, but onaverage foreign direct investment inflows tended to precedeexport surges within two year horizons.