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Exchange rate regimes and FDI flows to developing countries

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<mark>Journal publication date</mark>28/02/2012
<mark>Journal</mark>Review of International Economics
Issue number1
Volume20
Number of pages12
Pages (from-to)95-107
Publication StatusPublished
Early online date16/01/12
<mark>Original language</mark>English

Abstract

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.