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effect of foreign direct investment on interest rate, inflation rate and economic growth
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effect of foreign direct investment on interest rate, inflation rate and economic growth
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Chapter 2: Literature review2.1 introduction
2.2 overview of independent variable
2.3 overview of dependent variables
2.4 empirical literature review
2.4.1 lending interest rates and domestic
2.4.2 objective 2
2.4.3 objective 3
2.5 theoretical literature
2.6 conceptual framework
, 2.1 Introduction
Foreign Direct Investment (FDI) plays a pivotal role in the economic development of
nations, serving as a key driver of growth, technology transfer, and global integration. In Kenya,
understanding the complex relationship between FDI and macroeconomic variables is essential
for informed policy formulation and sustainable development. This literature review aims to
critically examine existing research and theoretical frameworks to elucidate the dynamics of FDI
in Kenya, with a specific focus on the interaction between FDI and macroeconomic variables.
2.2 Overview of Independent Variable: Macroeconomic Variables
The independent variables, including inflation rates, interest rates, and exchange rates,
exert significant influence on investment decisions and economic activities. Inflation rates reflect
the general price level in the economy and can impact investor confidence and purchasing
power. Interest rates determine the cost of borrowing and can affect investment attractiveness.
Exchange rates influence the competitiveness of exports and imports, thereby shaping FDI
patterns. Understanding the dynamics of these macroeconomic variables is crucial for
comprehending their impact on FDI in Kenya.
Here's an overview of some key macroeconomic variables that are typically considered in
the context of FDI in Kenya: GDP growth rate: The rate at which the country's economy is
expanding or contracting. GDP per capita: A measure of the country's economic output per
person, indicating the standard of living and purchasing power. Inflation reflects the rate at
which the general level of prices for goods and services is rising and, subsequently, the
purchasing power of currency is falling. Stable and moderate inflation rates are usually preferred
by investors. Exchange Rate: The value of the local currency (Kenyan Shilling, KES) relative to
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