Question

Critically explain foreign
exchange rate and currency
depreciation and foreign
Direct investment​

Answer 1

Answer:

explain in detail

Bytheway how are you

Answer 2

Answer:

Foreign Direct Investment (FDI) is an international flow of capital that provides a parent

company or multinational organization with control over foreign affiliates. By 2005, inflows of

FDI around the world rose to $916 billion, with more than half of these flows received by

businesses within developing countries.2 One of the many influences on FDI activity is the

behavior of 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 can influence

both the total amount of foreign direct investment that takes place and the allocation of this

investment spending across a range of countries.

When a currency depreciates, meaning that its value declines relative to the value of

another currency, this exchange rate movement has two potential implications for FDI. First, it

reduces that country’s wages and production costs relative to those of its foreign counterparts.

All else equal, the country experiencing real currency depreciation has enhanced "locational

advantage" or attractiveness as a location for receiving productive capacity investments