FDI and Currency Crises : Currency crises and the inflow of FDI

The purpose of this thesis is to analyse if there are any changes in the inflow of Foreign Direct Investments before, during and after a currency crisis. The thesis is based on a theoretical framework and has an empirical part, which use a regression equation. The theoretical framework presents a foundation of the incentives to mak FDI investments and the implications for a host country. Together with the possible link to the level of the real exchange rate in the host country, this thesis, based partly on previous paper written on the subject, presents a regression equation for an empirical analysis. The regression equation is based on a hypothesis about the changes in FDI inflow before, during and after the occurrence of a currency crisis in the host country. The empirical analysis presents different results concerning the link between FDI and a currency crisis. The hypothesis stated in the thesis is that a currency crisis influences FDI inflows. This hypothesis is rejected. Moreover, a currency crisis can have both positive and negative effects on the inflow of FDI for the selected countries. Results find further no similarities in regions or year of occurrence of the currency crises. The depth, length and structure of each currency crisis together with using the right definition of a currency crisis are two important factors relating to the outcomes in this study