Does the euro increase FDI in the real estate industry? Evidence from the German case

Abstract

Purpose

There have been many studies on the euro's impact on trade volume, foreign direct investment (FDI) and the integration of European financial markets. Previous research has tried to find empirical evidence for convergence of real estate securities markets. However, less attention has been paid to the euro's effect on FDI in the real estate industry. The purpose of this paper, therefore, is to analyze the euro's effect on FDI in the real estate industry between Germany and European partner countries.

Design/methodology/approach

It is hypothesised that the adoption of the euro will increase the volume of FDI flows in the real estate industry between Germany and European partner countries. To estimate the euro's effect on FDI in the real estate industry, a modified gravity equation is adopted. Pooled OLS and random effects models are utilised.

Findings

Results from panel data from 34 countries between 1986 and 2009 suggest that the euro contributed to the increase in the German bilateral FDI in the real estate industry to and from European partner countries. However, it is interesting that the euro's effects were only significant in FDI inflows under a random effects model.

Originality/value

The paper's findings provide original evidence for the positive impact of the euro on FDI in the real estate industry between Germany and European partner countries.

Citation

Choi, C. and Park, K. (2012), "Does the euro increase FDI in the real estate industry? Evidence from the German case", Journal of European Real Estate Research, Vol. 5 No. 1, pp. 88-100. https://doi.org/10.1108/17539261211216021