The Real Exchange Rate and Foreign Direct Investment in the United States: Relative Wealth vs. Relative Wage Effects / Michael W. Klein, Eric Rosengren.

Format:

Book

Author/Creator:

Klein, Michael W.

Contributor:

National Bureau of Economic Research.

Rosengren, Eric.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4192.

NBER working paper series no. w4192

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Real Exchange Rate and Foreign Direct Investment in the United States

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1992.

Summary:

There has been a significant correlation between United States inward foreign direct investment and the United States real exchange rate since the 1970s. Two alternative reasons for this relationship are that the real exchange rate affects the relative cost of labor and that the real exchange rate alters relative wealth across countries. In this paper we explore these alternatives by examining the determinants of four measures of inward foreign direct investment to the United States from seven industrial countries over the period 1979 to 1991. We find strong evidence that relative wealth significantly affects U.S. inward foreign direct investment. We find no evidence that relative wages have a significant impact on the determination of U.S. foreign direct investment. These results are robust to the choice of countries in our sample and when controlling for changes in tax codes.

Notes:

Print version record

October 1992.