Research Papers in Economics, Department of Economics, Stockholm University
The Effect of the Euro on Foreign Direct Investment
Abstract: In this paper the recent effect of the European Monetary
Union on inward FDI-flows is examined. We use a difference-in-differences
approach and fixed effects with common time controls. The estimated results
of the latter approach show that the introduction of the Euro raises inward
FDI by 17 percent within the Euro-area and by 9 and 12 percent to and from
non-member countries respectively. Moreover the geographical effects of the
Euro are explored. The results show partial agglomeration tendencies for
the euro area. There are also some indications of increased importance of
vertical specialization in the sample.
Keywords: Foreign Direct Investment; EMU; Panel Data; (follow links to similar papers)
JEL-Codes: C23; F02; F21; (follow links to similar papers)
36 pages, May 24, 2004
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- This paper is forthcoming as:
Petroulas, Pavlos, 'The Effect of the Euro on Foreign Direct Investment', European Economic Review.
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