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Foreign Direct Investment, Trade and Real Exchange Rate Linkages in Developing Countries

Linda Goldberg and Michael Klein

No 6344, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate the relationships among trade, foreign direct investment and the real exchange rate between a set of Southeast Asian and Latin American countries and both the United States and Japan. Foreign direct investment by both Japan and the United States to the Southeast Asian countries in our sample is significantly affected by bilateral real exchange rates. Also, trade between the countries in our sample and the United States and Japan is significantly affected by foreign direct investment. These sets of relationships, between the real exchange rate and foreign direct investment, and between foreign direct investment and trade, support two channels through which the real exchange rate affects trade: a direct effect on the relative price of goods and an indirect effect through foreign direct investment.

JEL-codes: F14 F21 (search for similar items in EconPapers)
Date: 1997-12
Note: ITI IFM
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Citations: View citations in EconPapers (48)

Published as Linda S. Goldberg & Michael Klein, 1996. "Foreign direct investment, trade, and real exchange rate linkages in developing countries," Proceedings, Federal Reserve Bank of San Francisco, pages 73-100.
Published as Managing Capital Flows and Exchange Rates: Perspectives from the Pacific Basin, Glick, Reuven, ed., Cambridge: Cambridge University Press, 1998,pp. 73-100.

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Journal Article: Foreign direct investment, trade, and real exchange rate linkages in developing countries (1996)
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