Exchange rate volatility and MNCs' production and distribution networks: The case of Japanese manufacturing MNCs

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7 Citations (Scopus)

Abstract

This paper empirically examines the impacts of exchange rate volatility on the location choice by Japanese multinational corporations (MNCs) and their intra-firm trade. We use affiliate-level data for Japanese MNCs for 1995, 1998 and 2001. We found that high exchange rate volatility discourages the establishment of an affiliate by MNCs. Moreover, the high exchange rate volatility causes the shift from inter-firm to intra-firm transactions. These findings imply the importance of maintaining a stable exchange rate environment in order for MNCs to expand their production and distribution networks.

Original languageEnglish
Pages (from-to)523-538
Number of pages16
JournalSingapore Economic Review
Volume53
Issue number3
DOIs
Publication statusPublished - 2008 Dec 1
Externally publishedYes

Keywords

  • Exchange rate volatility
  • Intra-firm trade
  • Location choice

ASJC Scopus subject areas

  • Economics and Econometrics

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