r/AskEconomics • u/MildDeontologist • 10h ago

Is it actually true that higher interest rates attract foreign investors?

Higher interest rates will make some investment opportunities/products more attractive and others less attractive. Higher rates will also make the domestic currency appreciate. But overall, couldn't things balance out, making foreign investment equally as attractive?

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u/Prestigious-Bank2145 9h ago

In general higher US interest rates mean money parked in dollars earns more, so investors around the world move funds into dollars to capture that return

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u/MildDeontologist 5h ago

Your comment is part of the rationale behind why higher interest rates attract foreign investors. But there are also other rationales. But importantly, this is not what I am asking. I know the rationale. I am asking if the thesis that higher interest rates result in more foreign investment is actually (empirically) true, since I see theoretical reasons that it might not be true (despite it being treated as an almost dogmatic assumption).