Exchange Rate Effects on Foreign Direct Investment Decision

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School of Business | Bachelor's thesis
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Date

2022

Department

Taloustieteen laitos

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Mcode

Degree programme

Taloustiede

Language

en

Pages

32

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Abstract

The flows of foreign direct investments (FDI) are essential factors in the economic development and integration. It is also crucial how the country manages to attract FDIs to the country and this literature review discusses the impact of the exchange on FDI and the choice of the host country. Existing literature supports the argument that a weak host country currency attracts FDIs and a strong one reduces attractiveness. When, considering the impact of exchange rate volatility on FDI, the results are mixed. According to the predictions presented in most of the research articles in this thesis, increased volatility increases uncertainty and should have a negative impaction FDI. But also, both positive and negative effects have been found, and thus there is no complete consensus on the matter.

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Thesis advisor

Stryjan, Miri

Keywords

FDI, exchange rate, exchange rate volatility, foreign direct investment

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https://urn.fi/URN:NBN:fi:aalto-202202131887

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[kand] Kauppakorkeakoulu / BIZ (Open Access)