Julie Lochard

Does the Single Currency Affect Foreign Direct Investment

Does the creation of the euro partly explain the sharp increase in European investments? To address this question, we derive a simple gravity-like model for bilateral foreign direct investment (FDI). Using this model, we find that the Economic and Monetary Union (EMU) has increased intra-EMU FDI stocks on average by around 30 percent. This effect varies over time and across EMU members. It is found to be larger for the outward investments of the less-developed EMU members. Moreover, contrary to early expectations of FDI diversion effects, EMU countries have invested more in non-EMU countries since the launch of the euro.

How do Cross-Border Mergers and Acquisitions Answer to Deregulation in Services?

Whereas competition in the manufacturing sector was progressively ensured beginning with the end of the Second World War, services have been progressively opened to international competition only since the late 1980s and are still among the most regulated sectors in OECD countries. In this paper, we analyse the impact of deregulation in that sector on cross‐border mergers and acquisitions (M&As) in services. We find that deregulation favours inward M&As in services. This positive effect occurs through two channels: a reduction in entry costs and an increase in investment opportunities. On the other hand, deregulation has an ambiguous impact on outward M&As that depends on the initial level of regulation in the acquiring country. In particular,we provide some evidence of a U‐shaped relationship between deregulation and outward M&As in the service sector. In countries that are initially highly deregulated,deregulation fosters outward M&As. Conversely, in situations in which government control is large, privatisation and deregulation are likely to reduce the incentive for firms to engage in cross‐border M&A deals.