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The Euro's Effect on Foreign Direct Investment: An econometric study of the euro’s effect on inward foreign direct investment
Linköping University, Department of Management and Engineering, Economics.
Linköping University, Department of Management and Engineering, Economics.
2019 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesisAlternative title
Effekten av euron på utländska direktinvesteringar. : En ekonometrisk undersökning över eurons effekt på inflödet av utländska direktinvesteringar (Swedish)
Abstract [en]

The aim of this thesis is to analyse if the euro has had any significant effect on the inflow of foreign direct investments. Our purpose is answered by developing an econometric model with inflow of foreign direct investments as the dependent variable. The model is estimated with the ordinary least squares method and panel data from ten different countries, five which have adopted the euro as their currency and five which have not. The data collected concerns the timeframe from 1994 to 2007.

The theoretical background is retrieved mainly from journal articles that have conducted similar research of how a common currency has affected foreign direct investments. We use these studies as a base for developing our regression model and also as a foundation for our analysis.

The results from this thesis show that the euro has had a large significant effect on foreign direct investments which we see by analysing the interaction variable in our regression. Furthermore, the results show that trade openness and GDP have the largest significant effect on FDI, meanwhile unit labour cost and exchange rate volatility had no significant effect at all. We conclude that the euro has a positive significant effect on inward foreign direct investment. Although the model suggests that having adopted the euro in 1999 would yield a 58.4 per cent increase in inward FDI compared to countries that kept their own currency, we are uncertain of the effect’s actual magnitude due to concern that we read some effects from the single market in the variable we use to estimate the euro’s effect.

Place, publisher, year, edition, pages
2019. , p. 24
Keywords [en]
Foreign Direct Investment, Direct Investment, Euro, Euro's Effect
National Category
Economics
Identifiers
URN: urn:nbn:se:liu:diva-157993ISRN: LIU-IEI-FIL-G—19/02101--SEOAI: oai:DiVA.org:liu-157993DiVA, id: diva2:1328662
Subject / course
Bachelor Thesis in Economics
Presentation
2019-06-07, Linköping, 10:15 (Swedish)
Supervisors
Examiners
Available from: 2019-07-03 Created: 2019-06-22 Last updated: 2019-07-03

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