Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5084158 | International Review of Economics & Finance | 2006 | 22 Pages |
Abstract
This paper proposes a system design (foreign exchange custodian board) that may stimulate foreign direct investment (FDI) in developing economies through the removal of foreign investors' exchange rate risk in investment outlay. For any expected distribution of exchange rate on any interval around the starting exchange rate, there exists a non-negative custodian service charge that both the developing economy and foreign investors can benefit from the proposed system. When the increase in domestic factors' value added caused by FDI is sufficiently large, the developing economy will benefit even in the absence of any custodian service charge.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Paul S.L. Yip, S.T. Yao,