The Effect Of Redenomination and Currency Exchange Rate on Foreign Investment in Some Countries

Abstract

This study provides a comprehensive investigation into the impact of redenomination and currency exchange rates on Foreign Direct Investment (FDI) across 20 countries, offering critical insights into the intersection of monetary policy and global investment flows. Recognizing the pivotal role of economic development, the research explores redenomination as a strategic policy to enhance financial credibility and stimulate foreign investment. Employing robust multiple regression analysis on secondary data sourced from the World Bank, the study examines key variables during a critical period—one year before and after redenomination. The findings reveal a significant positive relationship between redenomination and FDI, demonstrating that simplifying currency denominations bolsters investor confidence and financial clarity. Conversely, currency exchange rates exhibit no measurable influence on FDI in this context. These results underscore the transformative potential of redenomination when implemented under stable macroeconomic conditions, positioning it as a viable policy tool for fostering international investment. By highlighting the nuanced dynamics of these financial factors, the research delivers valuable implications for policymakers in developing countries striving to strengthen their economic infrastructure. The study not only advances academic discourse on the subject but also serves as a practical guide for countries considering redenomination as a pathway to economic resilience and enhanced foreign investment attraction.