1.1 Relationship between FDI and Exchange Rates
Exchange rates, defined as the domestic currency price of a foreign currency, matter both in terms of their levels and their volatility. Exchange rates could affect both the total amount of FDI that takes place and the allocation of this investment spending across a range of countries. When a currency depreciates, meaning its value declines relative to the value of another currency, this exchange rate movement has two potential implications for FDI.
1.2 Relationship between FDI and Inflation
Inflation is most often discussed because it changes the purchasing power of money and real values of variables such as interest rates, wages and many others. Inflation is defined as the persistent and appreciable increase in the general price level.
1.3 Relationship between FDI and Interest rates
Real interest rate helps to determine the trend of investment in an economy. When the interest rates are high, borrowing becomes quite expensive for the investors so they make less real investment. The high interest rates make it difficult for investors to cover their expenditure because their products becomes less competitive in both the domestic and the international market .
1.4 Relationship between FDI and GDP
Gross Domestic Product (GDP) refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living.
GDP can be determined in three ways, all of which should, in principle, give the same result. Relationships between FDI and a country’s economic growth are still a subject of great debate. GDP growth is largely measured by the level of productivity in the country.
1.5 Relationship between FDI and Employment
Employment is a contract between two parties, one being the employer and the other being the employee.
Foreign direct investment was expected to create employment to both foreigners and the host country.
1.1 Relationship between FDI and Exchange RatesExchange rates, defined as the domestic currency price of a foreign currency, matter both in terms of their levels and their volatility. Exchange rates could affect both the total amount of FDI that takes place and the allocation of this investment spending across a range of countries. When a currency depreciates, meaning its value declines relative to the value of another currency, this exchange rate movement has two potential implications for FDI. 1.2 Relationship between FDI and InflationInflation is most often discussed because it changes the purchasing power of money and real values of variables such as interest rates, wages and many others. Inflation is defined as the persistent and appreciable increase in the general price level. 1.3 Relationship between FDI and Interest ratesReal interest rate helps to determine the trend of investment in an economy. When the interest rates are high, borrowing becomes quite expensive for the investors so they make less real investment. The high interest rates make it difficult for investors to cover their expenditure because their products becomes less competitive in both the domestic and the international market .1.4 Relationship between FDI and GDPGross Domestic Product (GDP) refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living.GDP can be determined in three ways, all of which should, in principle, give the same result. Relationships between FDI and a country’s economic growth are still a subject of great debate. GDP growth is largely measured by the level of productivity in the country. 1.5 Relationship between FDI and EmploymentEmployment is a contract between two parties, one being the employer and the other being the employee.Foreign direct investment was expected to create employment to both foreigners and the host country.
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