Abstract
Foreign direct investment specially targeted to export sector is relatively new phenomenon in the global economy. Such inflow of foreign capital changes the sectoral composition of the economy, and it has some influence on the exchange rate of the destination country. In this study, we attempt to provide underlying theoretical and empirical explanations for exchange rate appreciation due to foreign capital inflow. We first use an extended three-sector specific factor model to explain analytically why and how an inflow of foreign capital boosts the price of a nontradable good that helps tilting the exchange rate in favor of the host country and then conduct an empirical analysis based on a panel dataset of 12 prominent developing countries over the time period 1980–2011 to substantiate our theoretical findings. We also strive to look at the possible consequences on factor prices and on sectoral de-composition of a representative economy.
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©2014 by De Gruyter
Artikel in diesem Heft
- Frontmatter
- Articles
- Network Analysis of World Trade using the BACI-CEPII Dataset
- Global Market Evaluation: A Longitudinal Efficiency Assessment Approach
- Examining the “Balance of Payments Stages” Hypothesis
- The Influence of Measures of Economic Freedom on FDI: A Comparison of Western Europe and Sub-Saharan Africa
- What’s News
- Regionalism in Trade: An Overview of the Last Half-Century
- Offshore Financial Centers in the Global Capital Network
- Foreign Capital Inflow and Real Exchange Rate Appreciation in Developing Economies: Theory and Empirical Evidence
- Trade Liberalization and Productivity Performance: Evidence from the Australian Passenger Motor Vehicle Industry
Artikel in diesem Heft
- Frontmatter
- Articles
- Network Analysis of World Trade using the BACI-CEPII Dataset
- Global Market Evaluation: A Longitudinal Efficiency Assessment Approach
- Examining the “Balance of Payments Stages” Hypothesis
- The Influence of Measures of Economic Freedom on FDI: A Comparison of Western Europe and Sub-Saharan Africa
- What’s News
- Regionalism in Trade: An Overview of the Last Half-Century
- Offshore Financial Centers in the Global Capital Network
- Foreign Capital Inflow and Real Exchange Rate Appreciation in Developing Economies: Theory and Empirical Evidence
- Trade Liberalization and Productivity Performance: Evidence from the Australian Passenger Motor Vehicle Industry