This study investigates the relationship between the real effective exchange rate (REER) and its volatility with the net inflow of foreign direct investment (FDI) to Canada, placing a novel emphasis on sector-level analysis. The study utilizes time series data from 2007 to 2022 and employs the autoregressive distributed lag (ARDL) approach to assess short-run and long-run relationships between the said variables. The findings reveal significant impacts of changes in REER, its volatility, and GDP on net FDI in the short run, with lasting effects of REER and its volatility, lagged GDP, and trade openness on FDI in the long run. At the sectoral level, FDI inflows in energy and mining, manufacturing, finance, and insurance exhibit significant sensitivity to changes in REER. Simultaneously, the volatility of REER has a significant impact on FDI inflows in manufacturing industries and the finance and insurance sector in the short run. In the long run, REER exerts a significant influence on the net FDI inflows in energy and mining, as well as manufacturing industries. The asymmetry in findings suggests a need for sector-specific attention to retaining and attracting FDI to Canada.

中文翻译：

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汇率及其波动如何影响对加拿大的外国直接投资？分类分析

本研究调查了实际有效汇率（REER）及其波动性与加拿大外国直接投资（FDI）净流入之间的关系，并特别强调部门层面的分析。该研究利用 2007 年至 2022 年的时间序列数据，并采用自回归分布滞后 (ARDL) 方法来评估上述变量之间的短期和长期关系。研究结果揭示了短期内实际有效汇率及其波动性和 GDP 的变化对净 FDI 的显着影响，以及长期内实际有效汇率及其波动性、滞后 GDP 和贸易开放度对 FDI 的持久影响。从部门层面来看，能源和采矿业、制造业、金融业和保险业的 FDI 流入对 REER 的变化表现出显着的敏感性。同时，实际有效汇率的波动短期内对制造业、金融保险业的FDI流入影响较大。从长期来看，REER对能源、采矿业以及制造业的FDI净流入有显着影响。调查结果的不对称表明需要针对特定​​部门关注保留和吸引外国直接投资到加拿大。