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How is the performance of the indicators: GDP and Inflation Rate in a Country?




A country with a large GDP, ever going to attract more foreign investors seek higher returns. An expanding economy is more attractive than a stagnant economy as sales and profits are expected to improve in the expansion of economies.

Thus,

In foreign currency will flock to the expansion of the economy (the money invested in the economy), increasing the value of the currency of the country's expanding economy. If the country with the expansion of the economy is growing too rapidly, the central bank may choose to raise interest rates to slow growth and avoid inflation.

Interest rates

Higher also attract more foreign capital, while at the same time reduce the potential for growth - to counter some of the "benefits" of foreign investment in that economy. You need to understand the interest rate parity and purchasing power parity in foreign currency.

Usually

The interest rate parity holds, and the purchasing power parity is not. Capital seeks higher interest rates, but compensates for inflation (reducing the purchasing power) some (if not all) of those benefits.

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