This paper investigates the factors determining the impact of exchange rate regimes on the behavior of domestic investment and foreign direct investment (FDI). Producers may diversify internationally in order to increase the flexibility of production. We characterize the possible equilibria in a...

A large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability. This paper investigates whether legal restrictions on international capital flows are associated with greater currency...