Guest Posted March 31, 2015 Report Share Posted March 31, 2015 higher interest rate -- appreciation? lower interest rate -- depreciation? why a higher interest rate increases foreign investment? I am confused, Reply Link to post Share on other sites More sharing options...
EconDaddy Posted March 31, 2015 Report Share Posted March 31, 2015 Hi, It's simple. If country X offers higher interest rates than country Y, then there will be many investors in country Y who decide to invest their money in country X as they get a higher return on their money there, than in their own country. As a result, there will be an increased demand (outward shift of the demand curve) for the currency of country X, which makes that currency appreciate. Cheers,EconDaddyIB Economics tutor and examinerwww.econdaddy.com Looking for commentary articles? Check this out Reply Link to post Share on other sites More sharing options...
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