The Impact of Exchange Rate on FDI and the Interdependence of FDI Over Time

The paper examines the impact of exchange rates on foreign direct investment (FDI) inflows into the United States in the context of a model that allows for the interdependence of FDI over time. Interdependence is modeled as a two-state Markov process where the two states can be interpreted as either a favorable or an unfavorable environment for FDI in an industry. Unbalanced industry-level panel data from the US wholesale trade sector are used in the analysis and yield two main results. First, the paper finds evidence that FDI is interdependent over time. Second, under a favorable FDI environment, the exchange rate has a positive and significant effect on the average rate of FDI inflows

Target company cross-border effects in acquisitions into the UK

We analyse the abnormal returns to target shareholders in crossborder and domestic acquisitions of UK companies. The crossborder effect during the bid month is small (0.84%), although crossborder targets gain significantly more than domestic targets during the months surrounding the bid. We find no evidence for the level of abnormal returns in crossborder acquisitions to be associated with market access or exchange rate effects, and only limited support for an international diversification effect. However, the crossborder effect appears to be associated with significant payment effects, and there is no significant residual crossborder effect once various bid characteristics are controlled for

Exchange Rate Pass-Through into German Import Prices – A Disaggregated Perspective

This study analyzes the exchange rate pass-through into German import prices based on disaggregated data taken on a monthly basis between 1995 and 2012. Our main contribution is twofold: firstly, we employ various time-series techniques to analyze data for different product categories, and also cointegration techniques to carefully distinguish between short-run and long-run pass-through coefficients. Secondly, in a panel data approach we estimate time-varying pass-through coefficients and explain their development with regard to various macroeconomic factors. Our results show that long-run pass-through is only partly observable and incomplete, while short-run pass-through shows a more unique character, although heterogeneity across product groups does exist. We are also able to identify several macroeconomic factors which determine changes in the degree of pass-through, which is especially relevant for policymakers

Economic Crisis and Investor Behaviour

This study investigates the effects of crises on domestic and foreign investors’ behaviours by utilizing a nonlinear approach. Considering the nonlinearity inherent in many financial variables, this study proposes an appropriate econometric modelling for analysing the investors’ behaviour, particularly during turbulent times. Specifically, STAR-STGARCH family models and generalized impulse response function analysis (GIRF) are employed to understand the different reactions of foreign and domestic investors at the Malaysian Stock Exchange market during the 1997 Asian crisis. The results of the model and the GIRF analysis have shown that foreign investors exhibited a herding behavior during the crisis and responded the shock more quickly than the domestic investors. When the same analysis is applied to understand the effects of the 2008 Subprime Mortgage Crisis in the Malaysian market, the behaviors of foreign and domestic investors are found to be very similar