An explanation of short-run fluctuations in foreign direct investment (FDI) flows by exchange rate movements is based on a belief that investing foreign companies can buy another country's assets and technologies cheaply when its currency is weak. The idea of a simple model of FDI depending on higher moments of exchange rates is completed by evidence of the dynamic effects of the process in question. Relevant panel data techniques are briefly recapitulated and then applied. Data of four central European countries show results which confirm the proposed theory.
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