The single European market, the European Monetary Union and United States and Japanese FDI flows to the EU

This paper investigates the possible impacts of the two major structural changes, namely the establishments of the Single European Market and the European Monetary Union, on FDI flows from the United States and Japan to 12 European Union countries. It applies the panel LM unit-root methodology to a data set consisting of United States and Japanese FDI flows to twelve EU countries for the period 1965–2005. The findings reveal that the patterns of FDI changed after the major institutional changes in question. However, Japanese FDI was affected more by the implementation of the Single Market Programme while the United States FDI was affected more by the creation of the European Monetary Union.