Exchange rates and U.S. foreign direct investment in the global processed food industry

Christine Boiling, Mathew Shane, Terry Roe

Research output: Contribution to journalArticlepeer-review

11 Scopus citations

Abstract

This paper focuses on estimating the effects of the real FDI-weighted exchange rate on real U.S. foreign direct investment (FDI) in the global processed food industry. We use a straight-forward production possibility framework as our theoretical basis to demonstrate the shift of production between countries on the basis of exchange rate fluctuations. The log-log regression model, derived from the theoretical model, gives statistically robust results to show that for the years 1983 to 2002, the exchange rate fluctuations, the level of fixed capital in the U.S. food industry, and the cost of materials in both the United States and abroad were major determinants of the stock of U.S. FDI in the global processed food industry. As the dollar appreciated, U.S. FDI increased. An overall conclusion is that countries with an undervalued exchange rate will experience increased FDI. Countries with overvalued exchange rates incur costs from lost export opportunities for domestic firms as well as discourage FDI.

Original languageEnglish (US)
Pages (from-to)230-238
Number of pages9
JournalAgricultural and Resource Economics Review
Volume36
Issue number2
DOIs
StatePublished - Oct 2007

Keywords

  • FDI-weighted exchange rates
  • Global processed food industry
  • U.S. Foreign direct investment (FDI)

Fingerprint Dive into the research topics of 'Exchange rates and U.S. foreign direct investment in the global processed food industry'. Together they form a unique fingerprint.

Cite this