Foreign Direct Investment

and
Exchange Rate Fluctuations
 Introduction:

1. Exchange rate fluctuation:

It is a change in value of one occurrence against another
occurrence due to different financial factors. It is analogous to
exchange risk.

2. Foreign direct investment:

It is an investment made by organization or individual in one
country in business attentions in another country, in the form of
either created business procedures or obtaining business assets in
the other country, such as possession or controlling interest in a
foreign company.
Problem Statement:

The protection of exchange rate risks

against and should be an element of
consideration in foreign investment and
decision.
Research Objectives:

The purpose of this study is how to defend the exchange

rate risk in foreign direct investment.
This research uses two-country model to demonstrate the
relationship of domestic and foreign investment to
exchange rate risk.
It is establish that exchange rate risks influence corporate
foreign investment.
It is also exposed that the reproduction includes many
results foundation of economic variables.
Research Questions:

To address the problems mentioned in our problem

statement, the following research questions will be answered:
What are the characteristics of the currencies and markets
operate in?
How can exchange rate risks be managed?
How to examine the impact of exchange rate fluctuations
on foreign direct investment?
Literature Review:
Many growing countries can count foreign direct investments as one of
the key factors in establishing its economic growth. FDI is a
remarkable source of capital inflows with positive effects on the host
countrys economy through direct technology convey, human capital
formulation, international trade morality, and competitive business
environment.
Exchange risks state to indeterminate effect fluctuating exchange rates
has on the value and procedures of the firm. A calm study now exist
which expects that trade movements will usually be concentrated in
reaction to exchange rate risk and increased in reaction to higher
exchange rate levels.
Theoretical Framework:
Exchange rate fluctuations depend on foreign direct investment
because exchange rate fluctuations happen when there is a change
in FDI.

Foreign Direct Exchange Rate

Investment Fluctuations

Independent Variable Dependent Variable

 Hypothesis:

; There is relationship between Exchange Rate Fluctuations and Foreign

Direct Investment

; There is no relationship between Exchange Rate Fluctuations and

Foreign Direct Investment
Research Methodology:

Population:
The target population for this research is all the sectors of the
Punjab economy for data relating to foreign direct
investment and exchange rates.

Sample:
The sampling frame was based on time series annual data of
the independent and dependent variables. The sample is
Lahore city from the whole Punjab. The research is
conducted from all the colleges of Lahore.
Reliability Analysis:

The reliability is mostly 0.7 but this research finding has

0.628 reliability.

Reliability Statistics
Cronbach's Alpha Cronbach's Alpha N of Items
Based on
Standardized Items

.628 .631 10
Correlation Analysis:
This research findings correlation is between +1 and -1.
*Correlation analysis is significant at the 0.05 level (two-tailed)
** Correlation analysis is highly significant at the 0.01 level (two-tailed)

1 2 3 4 5 6 7 8 9 10
1 1

2 .334 1

3 .386 .347 1

4 .263 .254 .331 1

5 -.085 .120 .279 .203 1

6 .200 .081 -.043 .247 .092 1

7 -.012 -.115 .094 -.085 .148 -.109 1

8 -.151 .013 -.065 -.130 .182 .168 .362 1

9 .025 -.035 .175 .131 .355 .208 .317 .327 1

10 .086 .152 .369 .337 .201 .310 -.024 .003 .339 1

Conclusion:
From this research we conclude that that the influence of
exchange rate fluctuations on FDI is unimportant in Punjab.
We also reminder that the relationship between the two
variables is confident hence we conclude that a growth in
exchange rate fluctuations of the local currency in
contradiction of foreign currencies indications to a growth in
FDI inflows though the influence is weak. However other
research procedures can be applied in future researches to
see if this conclusion is constant.
Thank
You