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Maroula Khraiche and Jeffrey Gaudette
''FDI, Exchange Rate Volatility and Financial Development: Regional Differences In Emerging Economies''
( 2013, Vol. 33 No.4 )
This paper evaluates the importance of an economy's financial development in determining the effect of exchange rate volatility on foreign direct investment (FDI) for a panel of 39 emerging economies over 35 years. Results show that the impact of exchange rate volatility on FDI in economies with lower financial development tends to be significant and positive, but the effect is not significant for countries with greater financial development. One explanation for such results is that firms may require less FDI to hedge against exchange rate uncertainty when financial markets are deeper.
Keywords: Real Exchange Rate Volatility, FDI, Financial Development
JEL: F2 - International Factor Movements and International Business: General
Manuscript Received : Apr 17 2013 Manuscript Accepted : Dec 31 2013

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