English, Article, Journal or magazine article edition: Going Multinational under Exchange Rate Uncertainty. Javier Gardeazabal; Henry Aray; Javier Gardeazábal

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Bookmark: http://trove.nla.gov.au/version/183279
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Going Multinational under Exchange Rate Uncertainty.
Author
  • Javier Gardeazabal
  • Henry Aray
  • Javier Gardeazábal
Physical Description
  • preprint
Notes
  • Foreign Direct Investment, Oligopoly, Real Option, Dumping.
  • RePEc:gra:wpaper:08/​19
  • A domestic exporting firm faces exchange rate uncertainty and has the option to install capacity abroad, thus becoming multinational. We analyze when the firm should exercise such an option optimally in the context of a Cournot market equilibrium. There are four main findings. First, the degree of hysteresis in foreign direct investment (FDI) grows as the number of firms increases. Second, a maintenance cost may induce the exporting firm to sustain losses, i.e. dumping. Third, the FDI-inducing effect of tariffs is decreasing in the number of firms. Fourth, FDI reduces exchange rate pass-through, especially for the range of exchange rate values that would otherwise have been maximal.
  • Foreign Direct Investment, Option Pricing, Exchange rate volatility
  • RePEc:ehu:dfaeii:200505
Language
  • English
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