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In the article, they surveyed 69 different countries, searching for answers on what affects FDI. Where, they found that interest rates will affect FDI flow: as the cost of financing, purchasing new equipment and the strength or weakness of the economy will play an important part. In the case of Australia, this is significant because the low interest rates that they have had in place since the 1980's, have helped contribute to this capital inflow. This is an interesting point, because the interest rates were lower in Australia than China. As a result, because of the lower interest rates, Australia attracted the largest amounts of FDI.
Clearly, interest rates play a major role in determining the overall flow of investment capital. This is because higher or lower rates will affect everything from the cost of purchasing equipment to consumer activity. As a result, the level of interest rates will have effect on FDI investments. In the case of Australia, the low interest rates have meant that they are attracting large amounts of FDI in comparison with other countries in the region (such as China)....
However, it is important to remember that interest rates are just one piece that will affect FDI rates; some other factors would include: wages, the ability to quickly settle industrial / labor disputes and a business friendly atmosphere. Together, these factors will play a role in determining how much FDI is coming into a country. In the case of Australia, all of these different factors have contributed to the increased amounts of foreign direct investments that are being received. When you examine this relationship with interest rates and other factors, you can be able to fully understand what is influencing foreign investors.
Bibliography
Australia's FDI Stock up 20% to U.S. $246 Billion. (2006, July 11). Retrieved March 16, 2010 from Australian
Consulate General website: http://www.guangzhou.china.embassy.gov.au/gzho/MediaEN35.html
Lee, J. (1998). How Does Foreign Direct Investment affect Economic Growth. Journal of International Economics,
45(1), 115 -- 135.
Yang, J. (2007). The Determinants of Foreign Direct…
Bibliography
Australia's FDI Stock up 20% to U.S. $246 Billion. (2006, July 11). Retrieved March 16, 2010 from Australian
Consulate General website: http://www.guangzhou.china.embassy.gov.au/gzho/MediaEN35.html
Lee, J. (1998). How Does Foreign Direct Investment affect Economic Growth. Journal of International Economics,
45(1), 115 -- 135.
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