Do exchange rate changes drive foreign direct investment?

Article Abstract:

Transaction-specific data on foreign acquisitions of US companies over the period 1975-89 are used to examine the link between the value of the dollar, cross-border acquisition flows and takeover premia. The study's findings support the results of earlier works that the depreciation of the US currency tends to increase both foreign acquisitions into the US and foreign takeover premia for US-based targets. However, compared to previous research, the present study provides deeper insights into the nature of the exchange rate relationship. For instance, it demonstrates that the inclusion of a proxy for relative corporate wealth in foreign direct investment (FDI) tests affects test results. No exchange rate elasticity is observed in relative FDI flows when a wealth proxy is included.

Foreign investments, Mergers, acquisitions and divestments, Prices and rates, Acquisitions and mergers, Foreign exchange, Corporations, Dollar (United States)

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Calibration based predictive distributions: an application of prequential analysis to interest rates, money, prices, and output

Article Abstract:

Probability forecasting, which applies probability theory to economics and business, is superior to point forecasting because it accounts for the volatility of time series. Research was conducted using a sequential method, prequential data analysis, for recalibrating predictive distributions derived from probability forecasts for the future values of time series for interest rates, money, prices, and output probability. The research indicates that the calibration hypothesis cannot be rejected out-of-hand for the majority of forecast horizons and time series. Traditional point forecasting can be improved when the forecasts are derived from recalibrated distributions.

Prices, Interest rates, Money

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