Impact of foreign exchange rate on direct investment.

Abstract

This research studies the relationship between the exchange rate volatility and the level of investment in the manufacturing sector in Singapore. We construct a time series of export shares and imported inputs share to study the exposure of Singapore manufacturing industries. The competitive structure of each industry is taken into consideration when studying investment decisions. In general, investment is affected by sales, exchange rate volatility and interest rate. Exchange rate volatility has some positive influence on the level of investment in Singapore but the impact is rather small.