TY  - JOUR
AU  - Klein,Michael W.
AU  - Rosengren,Eric
TI  - The Real Exchange Rate and Foreign Direct Investment in the United States: Relative Wealth vs. Relative Wage Effects
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4192
PY  - 1992
Y2  - October 1992
UR  - http://www.nber.org/papers/w4192
L1  - http://www.nber.org/papers/w4192.pdf
N1  - Author contact info:
Michael W. Klein
Fletcher School
Tufts University
Medford, MA 02155
Tel: (617) 627-2718
Fax: (617) 627-3712
E-Mail: michael.klein@tufts.edu

Eric Rosengren
Federal Reserve Bank of Boston
600 Atlantic Avenue
Boston, MA 02106
Tel: 617/973-3090
E-Mail: eric.rosengren@bos.frb.org
M2  - featured in NBER digest on 1993-03-01
AB  - There has been a significant correlation between United States inward foreign direct investment and the United States real exchange rate since the 1970s. Two alternative reasons for this relationship are that the real exchange rate affects the relative cost of labor and that the real exchange rate alters relative wealth across countries. In this paper we explore these alternatives by examining the determinants of four measures of inward foreign direct investment to the United States from seven industrial countries over the period 1979 to 1991. We find strong evidence that relative wealth significantly affects U.S. inward foreign direct investment. We find no evidence that relative wages have a significant impact on the determination of U.S. foreign direct investment. These results are robust to the choice of countries in our sample and when controlling for changes in tax codes.
ER  -