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Article
Business cycle determinants of US foreign direct investments
Applied Economic Letters (2013)
  • Lilia Cavallari, University of Rome III
  • Stefano D'Addona, University of Rome III
Abstract
This article investigates the role of output fluctuations and exchange rate volatility in driving US FDIs. Using a sample of 46 economies over the period 1982 to 2009, we provide the evidence of a positive relation between US FDI and host country’s cyclical conditions. Allowing for asymmetry over the business cycle, we find that the output elasticity of foreign investments is higher in booms than in recessions. An increase in exchange rate volatility, on the other hand, has a strong deterrent effect on US foreign investments. This effect is fairly stable over the business cycle.
Keywords
  • FDI,
  • business cycle,
  • cyclical output,
  • exchange rate volatility
Disciplines
Publication Date
2013
Citation Information
Lilia Cavallari and Stefano D'Addona. "Business cycle determinants of US foreign direct investments" Applied Economic Letters Vol. 20 Iss. 10 (2013)
Available at: http://works.bepress.com/lilia_cavallari/15/