-PDF Download- Corporate Investment And The Real Exchange Rate EBOOK

Corporate Investment and the Real Exchange Rate

Author: Mai Chi Dao

Publisher: International Monetary Fund

Published: 2017-08-07

Total Pages: 47

ISBN-13: 1484314239

We examine the relationship between real exchange rate depreciations and indicators of firm performance using data for a sample of more than 30,000 firms from 66 (advanced and emerging market) countries over the 2000-2011 period. We show that depreciations boost profits, investment, and sales of firms that are more financially-constrained and have higher labor shares. These findings are consistent with the view that depreciations boost internal financing opportunities by reducing real wages, thereby spurring investment. We show that these effects on firm performance are enduring, including in the market valuation of firms.

Real Exchange Rates, Economic Complexity, and Investment

Author: Steve Brito

Publisher: International Monetary Fund

Published: 2018-05-10

Total Pages: 21

ISBN-13: 1484354834

DOWNLOAD EBOOK →

We show that the response of firm-level investment to real exchange rate movements varies depending on the production structure of the economy. Firms in advanced economies and in emerging Asia increase investment when the domestic currency weakens, in line with the traditional Mundell-Fleming model. However, in other emerging market and developing economies, as well as some advanced economies with a low degree of structural economic complexity, corporate investment increases when the domestic currency strengthens. This result is consistent with Diaz Alejandro (1963)—in economies where capital goods are mostly imported, a stronger real exchange rate reduces investment costs for domestic firms.

Exchange Rates and Corporate Performance

Author: Yakov Amihud

Publisher: Beard Books

Published: 2003

Total Pages: 268

ISBN-13: 9781587981593

DOWNLOAD EBOOK →

This is a reprint of a previously published book. It consists of a series of papers by experts in the field on how the exchange rate volatility of the 1980s affected the financial policies of international firms.

The Effects of Real Exchange Rate Volatility on Sectoral Investment

Author: Bahar Erdal

Publisher: Routledge

Published: 2017-05-18

Total Pages: 172

ISBN-13: 1351801724

DOWNLOAD EBOOK →

Originally published in 1997. This study investigates what the effects of real exchange rate volatility are on sectorial investment in the fixed and flexible exchange rate systems. It lays out the results of research into the effects of the levels and volatility of real exchange rates on investment in the manufacturing sectors of the countries in the European Monetary System as well as of the countries in the flexible exchange rate system, with data from between 1973 and 1993. Examining the differences between the two systems in the results this book also looks at exchange rate effects on interest rates at the time.

Real Exchange Rate Uncertainty and Private Investment in Developing Countries

Author: Luis Servén

Publisher: World Bank Publications

Published: 2002

Total Pages: 24

ISBN-13:

DOWNLOAD EBOOK →

Serven examines empirically the link between real exchange rate uncertainty and private investment in developing countries using a large cross country-time series data set. He builds a GARCH-based measure of real exchange rate volatility and finds that it has a strong negative impact on investment, after controlling for other standard investment determinants and taking into account their potential endogeneity. The impact of uncertainty is not uniform, however. There is some evidence of threshold effects, so that uncertainty only matters when it exceeds some critical level. In addition, the negative impact of real exchange rate uncertainty on investment is significantly larger in economies that are highly open and in those with less developed financial systems.

Capital Flows, Exchange Rate Flexibility, and the Real Exchange Rate

Author: Mr.Tidiane Kinda

Publisher: International Monetary Fund

Published: 2011-01-01

Total Pages: 35

ISBN-13: 1455211877

DOWNLOAD EBOOK →

This paper analyzes the impact of capital inflows and exchange rate flexibility on the real exchange rate in developing countries based on panel cointegration techniques. The results show that public and private flows are associated with a real exchange rate appreciation. Among private flows, portfolio investment has the highest appreciation effect-almost seven times that of foreign direct investment or bank loans-and private transfers have the lowest effect. Using a de facto measure of exchange rate flexibility, we find that a more flexible exchange rate helps to dampen appreciation of the real exchange rate stemming from capital inflows.

Anticipated Real Exchange-rate Changes and the Dynamics of Investment

Author: Luis Serven

Publisher: World Bank Publications

Published: 1990

Total Pages: 54

ISBN-13:

DOWNLOAD EBOOK →

Unanticipated changes in the real exchange rate affect investment through their impact on the desired capital stock, whose direction depends on a number of factors and is in general ambiguous. In contrast, anticipated changes can also have an important effect on the optimal timing of investment, in a direction that depends on the financial openness of the economy and on the important content of capital goods. This issue is explored using a simple macroeconomic model.

Fiscal Policy and the Real Exchange Rate

Author: Mr.Santanu Chatterjee

Publisher: International Monetary Fund

Published: 2012-02-01

Total Pages: 40

ISBN-13: 1463945647

DOWNLOAD EBOOK →

Government spending on infrastructure has recently increased sharply in many emerging-market economies. This paper examines the mechanism through which public infrastructure spending affects the dynamics of the real exchange rate. Using a two-sector dependent open economy model with intersectoral adjustment costs, we show that government spending generates a non-monotonic U-shaped adjustment path for the real exchange rate with sharp intertemporal trade-offs. The effect of government spending on the real exchange rate depends critically on (i) the composition of public spending, (ii) the underlying financing policy, (iii) the intensity of private capital in production, and (iv) the relative productivity of public infrastructure. In deriving these results, the model also identifies conditions under which the predictions of the neoclassical open economy model can be reconciled with empirical regularities, namely the intertemporal relationship between government spending, private consumption, and the real exchange rate.

Determinants of Corporate Investment in China

Author: Ms.Nan Geng

Publisher: International Monetary Fund

Published: 2012-03-01

Total Pages: 20

ISBN-13: 147550232X

DOWNLOAD EBOOK →

This paper analyzes the evolution of investment in China, its main features, and its key determinants. In recent years, manufacturing, real estate, and infrastructure have been the main drivers of investment. Investment remains largely concentrated in coastal areas, but there has been a shift to greater investments inland in recent years. The empirical analysis of the determinants of investment indicates that financial variables, such as interest rates, the exchange rate, and the depth of the domestic capital market are important determinants of corporate investment. The results suggest in particular that financial sector reform, including that which deregulates and raises real interest rates as well as appreciates the real effective exchange rate, would lower investment and help rebalance growth away from exports and investment toward private consumption.

Adjustment, Investment, and the Real Exchange Rate in Developing Countries

Author:

Publisher: World Bank Publications

Published:

Total Pages: 49

ISBN-13:

DOWNLOAD EBOOK →

LDC adjustment packages Riccardo Faini and Jaime de Melo Developing countries have been hit by a fall in their terms of trade, high real interest rates on their external debt, and a drought in commercial lending from abroad. Their subsequent adjustment packages, often supported by loans from the IMF and World Bank, focused on a sharp real exchange rate depreciation to restore external balance and a host of microeconomic reforms to secure a simultaneous supply-side improvement. This paper examines the success of these ‘adjustment with growth' packages in a large sample of developing countries. We find these packages have been much more successful in LDCs which export manufactures than they have in those concentrating on primary exports (primarily low-income African countries); the latter have not resumed sustainable growth, and most of their external adjustment has arisen from expenditure reduction, not an increase in supply. The longer-term prospects for manufacturing exporters are also brighter: there we detect signs of increased efficiency and a smaller decline in investment than in primary exporters. But we also find that a high external debt burden and an unstable macroeconomic environment impede investment in all LDCs. In the longer term, adjustment with growth packages will succeed only if they are accompanied by a more stable macroeconomic environment and appropriate debt relief