The Impact of the Ruble Exchange Rate on Foreign Direct Investment from the EU to Russia in the Period 2014–2020
https://doi.org/10.26794/2587-5671-2023-27-2-6-16
Abstract
The purpose of this study is to explain the impact of fluctuations in the exchange rate of the Russian currency on the inflow of FDI from the European Union to the Russian Federation in the period 2014–2020 in order to provide practical recommendations for the development of investment policy and FDI attraction. The author used a threestage methodology, including theoretical, statistical and empirical analyses. The theoretical positions of the influence of the value of the currency on the inflow of various types of FDI into the national economy are determined. It has been established that the increase in the value of the currency has a positive effect on the inflow of FDI and on industries focused on the domestic market of the country. The weakening of the real exchange rate of the ruble generally had a negative impact on FDI inflows into the Russian market. With the fall in the exchange rate, foreign firms targeting the Russian market have reduced their investments. At the same time, export-oriented firms have increased their presence in the form of fixed investment in Russia. Empirical confirmation of theoretical provisions allows using the obtained results when making decisions regarding investment policy and attracting FDI to the national economy.
About the Author
Yu. K. Zaytsev
Russian Academy of National Economy and Public Administration
Russian Federation
Competing Interests:
Russian Federation
Yury K. Zaytsev - Cand. Sci. (Econ.), Senior Researcher
Moscow
Competing Interests:
The author has no conflicts of interest to declare
References
1. Chakrabarti R., Scholnick B. Exchange rate expectations and foreign direct investment flows. Weltwirtschaftliches Archiv. 2002;138(1):1–21. DOI: 10.1007/BF02707321
2. Kadochnikov P. Prospects for Russia’s participation in global and regional integration processes. Moscow: Delo; 2020. 392 p. (In Russ.).
3. Knobel’ A. Yu., Bagdasaryan K. M., Loshchenkova A. N., Proka K. A. Sanctions: Seriously and for a long time. Moscow: Delo; 2019. 80 p. (In Russ.).
4. Dunning J. H. The distinctive nature of multinational enterprise. In: Dunning J. H., ed. Economic analysis and multinational enterprise. London: Routledge; 1974:13–30.
5. Cushman D. O. Real exchange rate risk, expectations, and the level of direct investment. The Review of Economics and Statistics. 1985;67(2):297–308. 1985. DOI: 10.2307/1924729
6. Protsenko A. Vertical and horizontal foreign direct investments in transition countries. Inaugural-Dissertation zur Erlangung des Grades Doctor oeconomiae. München: Ludwig-Maximilians-Universität; 2003. 169 p. URL: https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.633.1092&rep=rep1&type=pdf (accessed on 23.12.2021).
7. Chen K.-M., Rau H.-H., Lin C.-C. The impact of exchange rate movements on foreign direct investment: Market-oriented versus cost-oriented. The Developing Economies. 2006;44(3):269–287. DOI: 10.1111/j.1746–1049.2006.00017.x
8. Aizenman J., Marion N. The merits of horizontal versus vertical FDI in the presence of uncertainty. Journal of International Economics. 2004;62(1):125–148. DOI: 10.1016/j.jinteco.2003.08.003
9. Gurzhieva K. O. Classification of foreign direct investments depending on ways of doing international business. Politematicheskii setevoi elektronnyi nauchnyi zhurnal Kubanskogo gosudarstvennogo agrarnogo universiteta = Scientific Journal of KubSAU. 2013;(88):39–55. (In Russ.).
10. Maiorov D. Experts assessed how the sanctions affect the ruble exchange rate. RIA Novosti. Feb. 05, 2021. URL: https://ria.ru/20210205/sanktsii-1596107561.html (accessed on 23.12.2021). (In Russ.).
11. Gurvich E., Prilepskiy I. The impact of financial sanctions on the Russian economy. Russian Journal of Economics. 2015;1(4):359–385. DOI: 10.1016/j.ruje.2016.02.002
12. Kuznetsov A. V., ed. Optimization of Russian external investment ties in the context of deteriorating relations with the EU. Moscow: IMEMO RAS; 2016. 120p. URL: https://www.imemo.ru/files/File/ru/publ/2016/2016_043.pdf (In Russ.).
13. Domínguez-Jiménez M., Poitiers N. F. An analysis of EU FDI inflow into Russia. Russian Journal of Economics. 2020;6(2):144–161. DOI: 10.32609/j.ruje.6.55880
14. Cherkasova V.A, Cherkasova E. S. The role of vertical integration in the activity of Russian manufacturers. Finansovyi menedzhment = Financial management. 2011;(1):62–71. (In Russ.).
15. Schmidt C. W., Broll U. Real exchange-rate uncertainty and US foreign direct investment: An empirical analysis. Review of World Economics. 2009;145(3):513–530. DOI: 10.1007/s10290–009–0024–3
16. Lin P., Saggi K. Foreign direct investment in a two-tier oligopoly: Coordination, vertical integration, and welfare. International Economic Review. 2011;52(4):1271–1290. DOI: 10.1111/j.1468–2354.2011.00667.x
17. Fritz O., Christen E., Sinabell F., Hinz J. Russia’s and the EU’s sanctions: Economic and trade effects, compliance and the way Forward. Wien: Austrian Institute of Economic Research; 2017. 59 p. URL: https://www.wifo.ac.at/jart/prj3/wifo/resources/person_dokument/person_dokument.jart?publikationsid=60669&mime_type=application/pdf (accessed on 20.12.2021).
18. Tkachev I. US “oil sanctions” are tougher than those of the European Union. RBC. Aug. 05, 2014. URL: https://www.rbc.ru/newspaper/2014/08/05/56be09339a7947299f72cbb6 (accessed on 23.12.2021). (In Russ.).
19. Timoshenko V. Import substitution policy in Russia: From words to deeds. Garant.ru. Jun. 09, 2015. URL: https://www.garant.ru/article/630000/ (accessed on 23.12.2021). (In Russ.).
Review
For citations:
Zaytsev Yu.K. The Impact of the Ruble Exchange Rate on Foreign Direct Investment from the EU to Russia in the Period 2014–2020. Finance: Theory and Practice. 2023;27(2):6-16. https://doi.org/10.26794/2587-5671-2023-27-2-6-16
Views:
540
Email this article 