Post-transition Regions as Locations for Foreign Direct Investment of Multinational Enterprises
Andrea Gauselmann
Hochschulschrift, Online-Publikation,
2014
Abstract
Multinational enterprises invest abroad to tap into location-specific advantages and to enhance their own competitiveness. At the same time, they increase productivity and industrial up-grading in the region of location and can be considered agents of technological and economic development. The aim of the thesis is to contribute to current research by investigating, which determinants and motives influence foreign investors to locate in European post-transition economies, how they appraise the quality of location factors on-site and under which conditions a knowledge and technology transfer takes place between the foreign owned firm and domestic firms, thereby leading to a better understanding of what is the impact and benefit of foreign investment in these regions.
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Is More Finance Better? Disentangling Intermediation and Size Effects of Financial Systems
Thorsten Beck, Hans Degryse, Christiane Kneer
Journal of Financial Stability,
2014
Abstract
Financial systems all over the world have grown dramatically over recent decades. But is more finance necessarily better? And what concept of financial system – a focus on its size, including both intermediation and other auxiliary “non-intermediation” activities, or a focus on traditional intermediation activity – is relevant for its impact on real sector outcomes? This paper assesses the relationship between the size of the financial system and intermediation, on the one hand, and GDP per capita growth and growth volatility, on the other hand. Based on a sample of 77 countries for the period 1980–2007, we find that intermediation activities increase growth and reduce volatility in the long run. An expansion of the financial sectors along other dimensions has no long-run effect on real sector outcomes. Over shorter time horizons a large financial sector stimulates growth at the cost of higher volatility in high-income countries. Intermediation activities stabilize the economy in the medium run especially in low-income countries. As this is an initial exploration of the link between financial system indicators and growth and volatility, we focus on OLS regressions, leaving issues of endogeneity and omitted variable biases for future research.
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Natural-resource or Market-seeking FDI in Russia? An Empirical Study of Locational Factors Affecting the Regional Distribution of FDI Entries
K. Gonchar, Philipp Marek
IWH Discussion Papers,
No. 3,
2013
Abstract
This paper conducts an empirical study of the factors that affect the spatial distribution of foreign direct investment (FDI) across regions in Russia; in particular, this paper is concerned with those regions that are endowed with natural resources and market-related benefits. Our analysis employs data on Russian firms with a foreign investor during the 2000-2009 period and linked regional statistics in the conditional logit model. The main findings are threefold. First, we conclude that one theory alone is not able to explain the geographical pattern of foreign investments in Russia. A combination of determinants is at work; market-related factors and the availability of natural resources are important factors in attracting FDI. The relative importance of natural resources seems to grow over time, despite shocks associated with events such as the Yukos trial. Second, existing agglomeration economies encourage foreign investors by means of forces generated simultaneously by sector-specific and inter-sectoral externalities. Third, the findings imply that service-oriented FDI co-locates with extraction industries in resource-endowed regions. The results are robust when Moscow is excluded and for subsamples including only Greenfield investments or both Greenfield investments and mergers and acquisitions (M&A).
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Stock Market-Induced Currency Crises: A New Type of Twins
Stefan Eichler, Dominik Maltritz
Review of Development Economics,
No. 2,
2011
Abstract
This paper explores the link between currency crises and the stock market in emerging economies. By integrating foreign stock market investors in a currency crisis model, we reveal a new fundamental inconsistency as a potential crisis trigger: since emerging economies' stock markets often have high returns, whereas central bank reserves grow slowly or decline, the amount of reserves foreign investors can deplete when selling their stocks and repatriating the proceeds grows over time and is considerably higher than funds that have been invested in the stock market. Capital withdrawals of foreign stock market investors can trigger currency crises by depleting central bank reserves, particularly in successful countries with booming stock markets and large foreign investment.
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Exchange Rate Expectations and the Pricing of Chinese Cross-listed Stocks
Stefan Eichler
Journal of Banking and Finance,
No. 2,
2011
Abstract
I show that the price discounts of Chinese cross-listed stocks (American Depositary Receipts (ADRs) and H-shares) to their underlying A-shares indicate the expected yuan/US dollar exchange rate. The forecasting models reveal that ADR and H-share discounts predict exchange rate changes more accurately than the random walk and forward exchange rates, particularly at long forecast horizons. Using panel estimations, I find that ADR and H-share investors form their exchange rate expectations according to standard exchange rate theories such as the Harrod–Balassa–Samuelson effect, the risk of competitive devaluations, relative purchasing power parity, uncovered interest rate parity, and the risk of currency crisis.
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Wer zahlt für das schöne Leben? Technische Infrastruktur in Zeiten von Bevölkerungsrückgang am Beispiel von drei ostdeutschen Mittelstädten
C. Deilmann, I. Kropp, Peter Haug
Tagungsband Arbeitskreis Stadterneuerung an deutschsprachigen Hochschulen,
2010
Abstract
In cities with decreasing population there is an increasing concern about the future cost of technical infrastructure. A diminishing number of inhabitants will have to bear the costs of the public services provided by their community. Beyond the pure cost arithmetic the main research question of our project was how urban planning can contribute to alleviating the rising average cost per service unit (cbm, sqm). The study was carried out for three medium-sized cities in the eastern part of Germany with a time horizon of 2030. The focus is on water, sewage and communal roads.
The rather surprising result was that urban planning (attempts for densification, inner city development instead of extensivation of the urban fabric) has little effect on long-term cost compared to the unavoidable yearly renovation requirements of the technical infrastructure. Because of the dominant block of fixed cost in technical infrastructure systems, the demographic development is the main cost determinant. Therefore, in future a massive problem in financing today’s standard of public services will be imminent.
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The Attractiveness of East Germany as Investment Location for Multinational Enterprises (MNEs)
Andrea Gauselmann, Björn Jindra
Wirtschaft im Wandel,
No. 6,
2010
Abstract
The article analyses the general motives of MNEs for investment in East Germany as well as the quality of selected locational factors in East Germany from multinational affiliates’ point of view. In contrast to existing studies for East Germany the article dedicates particular attention to the role of MNEs’ heterogeneity. The research draws from the third survey of the IWH FDI-Micro database in 2009, which offers a representative sample of multinational affiliates of the East German economy. The results show a fundamental shift in the relative importance of investment motives during the transition process of East Germany. Since the mid 1990s East Germany attracts increasingly investors that target economies of scope of local technological advantage rather than low-cost advantages of local production factors as the case in the early transition period. It can be demonstrated that the investment motives depends on the country of origin, the type and timing of market entry as well as the sector of the multinational affiliate. Amongst the given locational factors affiliates value the quality of the socio-cultural context highest. This group of soft factors is followed by locational aspects related the potential for technological cooperation, the availability of labour, and finally the extent of fiscal and financial incentives. There exist significant differences in the judgment about quality of different locational aspects depending on the country of origin and the underlying investment motive. Finally the article identifies possible policy measures in the area of skilled labour, technology and investment policy in order to sustain the attractiveness of East Germany as investment location in the future.
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The IWH signals approach: the present potential for a financial crisis in selected Central and East European countries and Turkey
Hubert Gabrisch, Simone Lösel
Wirtschaft im Wandel,
No. 8,
2006
Abstract
The steep increase of oil prices, general threats rooting from Iran’s nuclear program, and doubts about the future policy of important central banks recently caused more uncertainties of investors on international financial markets. This explains the higher volatility and the fall of indices on stock markets including those of some Central and East European countries. International investors could respond with adjustments of their portfolio and trigger off a financial crisis. On this background, the article studies the potential for a financial crises in the region mentioned. The analytical tool is the IWH signals approach. The study concludes that the risk of the outbreak of a financial crisis within the next 18 months is rather unrealistic in most countries. A stable economic policy, high real growth rates, a financial system already robust compared to earlier times of transition, and appropriate exchange rate arrangements protect the countries against speculative attacks and portfolio adjustments. When the composite indicator shows deterioration like in the Baltic countries, it turned out to be negligible. For the Slovak Republic and Slovenia, the composite indicator even improved. A closer look to individual indicators reveals still some problems in the banking sectors of the Czech Republic, Poland, and Hungary, however, without out major impact on the composite indicator.
This general assessment does not apply to Romania, and, in particular, to Turkey. The composite indicator signals a significant increase of the risk potential for the next 18 months in both countries. There is a considerable need for sound policy action.
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Current economic situation: A silver lining on the horizon
Wirtschaft im Wandel,
No. 12,
2003
Abstract
The Federal Statistical Office has recently released the figures for second quarter GDP and its components. At the same time, the data for the past four years has been revised. This made it necessary to update the existing IWH-forecasts for 2003 and 2004. Stimulated by an improving world economy GDP will not decline this year but merely stagnate. In 2004 the external stimulus will further increase and accounting for the additional working days economic activity will rise by 1.8%. The turnaround at the labour market will not take place before the second half of 2004. Fiscal policy is currently aiming to balance the budget, but so far the government tried to achieve this goal by increasing levies and taxes. In order to maintain the growth potential, a sustainable consolidation, though, should work by means of cutting expenditure. Overall the deficit will be 4.1% and 3.9% of nominal GDP in this and next year, respectively.
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