TY  - JOUR
AU  - Froot,Kenneth A.
AU  - Stein,Jeremy C.
TI  - Exchange Rates and Foreign Direct Investment:  An Imperfect Capital Markets Approach
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2914
PY  - 1992
Y2  - February 1992
UR  - http://www.nber.org/papers/w2914
L1  - http://www.nber.org/papers/w2914.pdf
N1  - Author contact info:
Kenneth A. Froot
Graduate School of Business
Harvard University
Soldiers Field
Boston, MA 02163
Tel: 617/495-6677
Fax: 617/496-7357
E-Mail: kfroot@hbs.edu

Jeremy C. Stein
Department of Economics
Harvard University
Littauer 209
Cambridge, MA  02138
Tel: 617/496-6455
Fax: 617/496-7352
E-Mail: jeremy_stein@harvard.edu
M2  - featured in NBER digest on 1989-09-01
AB  - We examine the connection between exchange rates and foreign direct investment that arises when globally integrated capital markets are subject to informational imperfections. These imperfections cause external financing to be more expensive than internal financing, so that changes in wealth translate into changes in the demand for direct investment. By systematically lowering the relative wealth of domestic agents, a depreciation of the domestic currency can lead to foreign acquisitions of certain domestic assets. we develop a simple model of this phenomenon and test for its relevance in determining international capital flows.
ER  -