Does the Single Currency Affect Foreign Direct Investment?* - Université Paris-Est-Créteil-Val-de-Marne
Journal Articles Scandinavian Journal of Economics Year : 2011

Does the Single Currency Affect Foreign Direct Investment?*

Abstract

Does the creation of the euro partly explain the sharp increase in European investments? To address this question, we derive a simple gravity-like model for bilateral foreign direct investment (FDI). Using this model, we find that the Economic and Monetary Union (EMU) has increased intra-EMU FDI stocks on average by around 30 percent. This effect varies over time and across EMU members. It is found to be larger for the outward investments of the less-developed EMU members. Moreover, contrary to early expectations of FDI diversion effects, EMU countries have invested more in non-EMU countries since the launch of the euro.

Dates and versions

hal-03952229 , version 1 (23-01-2023)

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José de Sousa, Julie Lochard. Does the Single Currency Affect Foreign Direct Investment?*. Scandinavian Journal of Economics, 2011, pp.no-no. ⟨10.1111/j.1467-9442.2011.01656.x⟩. ⟨hal-03952229⟩
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