Haiyue Liu, Zixuan Min

(Sichuan University, Chengdu City, Sichuan Province, China)

 

 

Abstract: This paper attempts to find out the features and the effects of exchange rate (ER) and political environment (PE) on China’s foreign direct investment (FDI) into European Union’s 28 countries for a recent period of 2003-2013 using GMM model. We measure ER level, ER volatility and expectation by the first, second and third moment of the ER changes, and capture the effect of Political Risk using International Country Risk Guide (ICRG). The study indicates an insignificant response of China’s FDI to PE and a mixed effect of different ER measures on China’s FDI into EU countries.

 

 

Key words: FDI, exchange rate, political risk, European Union

 

JEL codes: F21, F23, F31