Cushman gratefully acknowledges his appointment as a visiting fellow at the Faculty of Business of Oxford Brookes University, which was conducive to the research collaboration underlying this paper. Preliminary analyses for this study benefited from prior work undertaken by De Vita and Abbott as part of a project funded by the ESRC grant RES-000-22-2350, which is gratefully acknowledged.
Exchange Rate Regimes and Foreign Direct Investment Flows to Developing Countries
Article first published online: 16 JAN 2012
© 2012 Blackwell Publishing Ltd
Review of International Economics
Volume 20, Issue 1, pages 95–107, February 2012
How to Cite
Abbott, A., Cushman, D. O. and De Vita, G. (2012), Exchange Rate Regimes and Foreign Direct Investment Flows to Developing Countries. Review of International Economics, 20: 95–107. doi: 10.1111/j.1467-9396.2011.01010.x
- Issue published online: 16 JAN 2012
- Article first published online: 16 JAN 2012
Drawing on recent advances in exchange rate regime classifications, the paper examines empirically the effect of exchange rate regimes on foreign direct investment (FDI) flows to developing countries. Using system generalized methods of moments estimation on a panel of 70 developing countries for the period 1985–2004, we find that developing countries adopting de facto fixed or intermediate regimes significantly outperform those opting for a flexible exchange rate system in attracting FDI flows. No statistically significant differences in the FDI-inducing properties of fixes, intermediates and floats are found using the International Monetary Fund official classification.