Linkage between Exchange Rate and Foreign Direct Investments: Empirical evidence from Developing Countries

• Název práce v češtině: Vztah mezi menovym kurzem a primymi zahranicnimi investicemi: empiricka evidence z rozvijejicich se zemi
• Název v anglickém jazyce: Linkage between Exchange Rate and Foreign Direct Investments: Empirical evidence from Developing Countries
• Klíčová slova: výmenný kurz, priame zahraničné investície, rozvojové krajiny
• Klíčová slova anglicky: exchange rate, foreign direct investments, developing countries
• Akademický rok vypsání: 2011/2012
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: doc. PhDr. Adam Geršl, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 19.06.2012
• Datum zadání: 19.06.2012
• Datum a čas obhajoby: 24.06.2014 00:00
• Místo konání obhajoby: IES
• Datum odevzdání elektronické podoby: 06.01.2014
• Datum proběhlé obhajoby: 24.06.2014
• Oponenti: doc. Ing. Vladimír Benáček, CSc.

Seznam odborné literatury

1. Engle, R. F. (1982): Autoregressive Conditional Heteroskedasticity with Estimates of the Variance of United Kingdom Inflation. Econometrica, 50(4), pp. 987–1007.
2. Bollerslev, T. (1986): Generalized Autoregressive Conditional Heteroskedasticity. Journal of Econometrics, vol 31, pp. 307–327.
3. Abbott, A., Cushman D. O., De Vita, G. (2012): Exchange Rate Regimes and Foreign Direct Investment Flows to Developing Countries. Review of International Economics, 20(1), 95–107.
4. Cushman, D. O. (1985): Real Exchange Rate Risk, Expectations, and the Level of Foreign Direct Investment. Review of Economics and Statistics 67, 297–308.
5. Bleaney, M., Francisco, M. (2007): Exchange Rate Regime, Inflation and Growth in Developing Countries. The Berkeley Electronic Journal of Macroeconomics 7 (2007): Article 18.
6. Goldberg, L. S., Klein, M. (1998): Foreign Direct Investment, Trade and Real Exchange Rate Linkages in Developing Countries. Managing Capital Flows and Exchange Rates: Perspectives from the Pacific Basin, Cambridge University Press, pp.73-100.

Předběžná náplň práce

Foreign direct investments (FDI) have become the inherent part of almost every economy all over the world. As a consequence of their inevitable role there have raised incentives to study deeply the determinants, effects and spillovers of these type of investments. In my thesis I would like to examine in more detail one of the location specific determinant of FDI - the exchange rate. Since there are number of determinants potentially affecting FDIs the purpose of the thesis would be to appropriately handle the data in order to discern the true impact of exchange rate on foreign direct investments. Specifically, I will analyze if and how FDI inflows respond to the exchange rate level, exchange rate uncertainty and exchange rate regimes in the recipient countries. The main contribution of this thesis is, to the best of my knowledge, that it would be the first comprehensive analysis particularly dealing with all of the aforementioned variables. Moreover, as the empirical literature contains mixed results about how FDIs react on proposed variables this thesis will also contribute to a limited amount of papers dealing with this issue. I will apply the study on developing countries and in order to correctly investigate the specified hypotheses I will use the data from the statistics provided by United Nations Conference on Trade and Development (UNCTAD).

Hypothesis #1: FDI inflows respond to the exchange rate level.
Hypothesis #2: Exchange rate uncertainty is a determinant of FDI inflows.
Hypothesis #3: Exchange rate regime is a determinant of FDI inflows.

With regard to analyse the specified topic properly I will use the standard econometric methodology that best fit testing the hypotheses and the dataset used. I will use not only standard determinants of FDI inflows that occur in the economic literature but I will also add variables determining exchange rate level, exchange rate uncertainty and exchange rate regime to the estimated equation in order to check for the hypotheses. Special attention will be devoted to the variable of exchange rate uncertainty which I would like to model as volatility of exchange rate using GARCH methodology. Moreover I will take the potential endogeneity problem into considerations that could arise from two-way influence between exchange rate volatility and FDI inflows. Econometric part of the thesis will be performed in an appropriate statistical software.

Outline:
1. Introduction
2. Literature Review
3. Background
3.1. Foreign Direct Investments in Developing Countries
3.2. Exchange Rate Development in Developing Countries
3.3. Exchange Rate Regimes
4. Data and Methodology Description
5. Empirical Results
6. Policy Implications
7. Conclusion