Startseite Foreign Capital Inflow and Real Exchange Rate Appreciation in Developing Economies: Theory and Empirical Evidence
Artikel
Lizenziert
Nicht lizenziert Erfordert eine Authentifizierung

Foreign Capital Inflow and Real Exchange Rate Appreciation in Developing Economies: Theory and Empirical Evidence

  • Anindya Biswas EMAIL logo , Biswajit Mandal und Nitesh Saha
Veröffentlicht/Copyright: 25. September 2014
Veröffentlichen auch Sie bei De Gruyter Brill

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.

JEL Classifications: F21; F31

References

Aron, J., I. A.Eldadawi, and B.Kahn. 1997. “Determinants of the Real Exchange Rate in South Africa.” Center for the Study of African Economies WPS/97-16.Suche in Google Scholar

Baffes, J., I. A.Elbadawi, and S. A.O’Connell. 1999. “Single-Equation Estimation of the Equilibrium Real Exchange Rate.” In Exchange Rate Misalignment: Concepts and Measurement for Developing Countries, edited by L. E.Hinkle and P. J.Montiel, 152. Oxford: Oxford University Press.10.1596/1813-9450-1800Suche in Google Scholar

Balassa, B.1964. “The Purchasing–Power Parity Doctrine: A Reappraisal.” Journal of Political Economy72:58496.10.1086/258965Suche in Google Scholar

Basnet, H. C., and K. P.Upadhyaya. 2014. “Do Remittances Attract Foreign Direct Investment? An Empirical Investigation.” Global Economy Journal14(1):19.10.1515/gej-2013-0052Suche in Google Scholar

de Boyrie, M. E.2010. “Structural Changes, Causality, and Foreign Direct Investments: Evidence from the Asian Crises of 1997.” Global Economy Journal9(4):138.Suche in Google Scholar

Edison, H., and D.Pauls. 1993. “Reassessment of the Relationship between Real Exchange Rates and Real Interest Rates: 1974–1990.” Journal of Monetary Economics31:16588.10.1016/0304-3932(93)90043-FSuche in Google Scholar

Edwards, S.1989. Real Exchange Rates, Devaluation and Adjustment: Exchange Rate Policy in Developing Countries. Cambridge: The MIT Press.Suche in Google Scholar

Ghosh, M., and W.Wang. 2010. “Does FDI Accelerate Economic Growth? The OECD Experience Based on Panel Data Estimates for the Period 1980-2004.” Global Economy Journal9(4):121.Suche in Google Scholar

Gruen, F., and M.Corden. 1970. “A Tariff That Worsens Terms of Trade.” In Studies in International Economics, edited by I. A.McDougall and R. H.Snapes. Amsterdam: North-Holland.Suche in Google Scholar

International Monetary Fund. 2013. International Financial Statistics Databases. Washington, DC.Suche in Google Scholar

Jones, R. W.1965. “The Structure of Simple General Equilibrium Models.” Journal of Political Economy73:55772.10.1086/259084Suche in Google Scholar

Jones, R. W.1971. “A Three-Factor Model in Theory, Trade and History.” In Trade, Balance of Payments and Growth, edited by J.Bhagwati, et al., 321. Amsterdam: North-Holland.Suche in Google Scholar

Jones, R. W., and S.Marjit. 1992. “International Trade and Endogenous Production Structure.” In Economic Theory and International Trade: Essays in Honour of J. Trout Rader, edited by W.Neuefeind, et al. Berlin:Springer-Verlag.10.1007/978-3-642-77671-7_9Suche in Google Scholar

Jones, R. W., and S.Marjit. 2008. “Competitive Trade Models and Real World Features.” Economic Theory41(1):16374.10.1007/s00199-008-0394-0Suche in Google Scholar

Marjit, S.2003. “Economic Reform and Informal Wage: A General Equilibrium Analysis.” Journal of Development Economics72(1):37178.10.1016/S0304-3878(03)00082-8Suche in Google Scholar

Marjit, S.2005. “Complementarity and International Trade: On Some Recent Development in Structural General Equilibrium Models.” In Economic Theory in a Changing World: Policy Making for Growth, edited by S.Lahiri and P.Maiti. Oxford: OUP.Suche in Google Scholar

Marjit, S.2008. International Trade and Economic Development: Essays in Theory and Policy. New Delhi: OUP.Suche in Google Scholar

Meredith, G., and M. D.Chinn. 1998. “Long-Horizon Uncovered Interest Rate Parity.” NBER, Working Paper No. 6797.Suche in Google Scholar

Nowak, J. J., M.Sahli, and P. M.Sgro. 2003. “Tourism, Trade and Domestic Welfare.” Pacific Economic Review8:24558.10.1111/j.1468-0106.2003.00225.xSuche in Google Scholar

Tiwari, A. K.2011. “Foreign Aid, FDI, Economic Freedom and Economic Growth in Asian Countries.” Global Economy Journal11(3):126.10.2202/1524-5861.1705Suche in Google Scholar

Whalley, J., and A.Weisbrod. 2012. “The Contribution of Chinese FDI to Africa’s Pre Crisis Growth Surge.” Global Economy Journal12(4):128.10.1515/1524-5861.1873Suche in Google Scholar

World Bank. 2013. World Development Indicators. Washington, DC.Suche in Google Scholar

Published Online: 2014-9-25
Published in Print: 2014-10-1

©2014 by De Gruyter

Heruntergeladen am 22.9.2025 von https://www.degruyterbrill.com/document/doi/10.1515/gej-2014-0020/html
Button zum nach oben scrollen