EX CHANGE RATE CHANGES EF FECTS ON FOR EIGN DI RECT IN VEST MENT

For eign di rect in vest ment (FDI) is an im por tant phe nom e non in in ter na tional eco nomic re la tions. Gen er ally, FDI is stud ied from the point of view of cap i tal and tech nol ogy trans fers to the re cip i ent coun tries while re spect ing a ba sic fact that profit is the main in ves tor’s in ter est. In this pa per in Part 2, some rep re sen ta tive ex am ples of typ i cal FDI mod els are pre sented, whereas Part 3 should jus tify the spec i fi ca tion of a model which is for mu lated and ap plied in Part 4. In ves tors can be driven by the ex pec ta tion of max i mum profit which would be ob tained by al lo cat ing FDI ac cord ing to the ex change rate vol a til ity, i.e. af ter a sud den large de val u a tion of the host coun try cur rency large FDI in flows will fol low as fu ture ap pre ci a tion is ex pected. Large ex change rate shocks are de scribed with the help of skew ness. Neg a tive skew ness means that the appreciations oc cur more of ten. Rea son ing of the model ex plain ing FDI by mean, stan dard de vi a tion and skew ness of changes of ex change rate is pro vided. An ap pli ca tion to two New EU Members and two ASEAN countries is presented using panel data and seemingly unrelated regression technique.