Analysis of the Impact of the Real Interest Rate on the Capital Account Movements – Evidence from OECD Countries

The question of the impact of interest rate on direct investments in the country is one of the basic in international economics, however, no universal answer has been given yet. In the 1970-90s several researches have been made in this field, namely by Black (1974), Feldstein (1991) and Calvo (1998), however, the first is more theoretical and lacks empirical evidence and others pay attention to several specific regions and not the whole world. Our study’s purpose is to generalize the results of previous studies on that topic by studying the cases of 36 OECD countries. The sample for our study will consist of panel data collected for OECD countries for the years 1999 – 2017, observations will be collected on the yearly basis due to huge variation of FDI inflows on a monthly basis. Than we will build several models – linear, semi-logarithmic and logarithmic – with real interest rate as the independent variable and the net FDI inflow as predicted variable. Preliminary outcomes are hard to be predicted as several previous studies lead to different results due to some regional and timeframe specifics.