Monetary Policy and FDI: a literature review

Though a vast amount of research has been done on both specific macroeconomic and microeconomic topics these two areas of research are mostly considered independent from each other. Specifically, monetary policy actions and its effects to the overall economy are a highly discussed issue. In addition, on the firm level there are a huge number of studies dealing with microeconomic determinants for FDI decisions. Nevertheless, the interrelationship between these two research fields is often missed. Hence, this paper investigates on theories of these two topics thereby pointing out the found research gap. Particularly, the gap examined in this work comprises consequences of an expansionary monetary supply shock to interest rates and inflation and the impact on a country’s location advantages. Based on this, this paper proposes a hypothesis by relying on economic theories.