Abstract
Abstract With economic globalization, the growth rate of foreign direct investment beyond export’s growth rate in recent years. Lots of macroeconomic factors affect the FDI decisions made by firms, in which exchange rate plays the most crucial role. This paper attempts to use dynamic stochastic general equilibrium (DSGE) model to explore the impact of the economic structure which exists FDI when exchange rate shock and the entry cost shock happened, contains the salary and FDI flows. Finally found that when currencies appreciate, domestic foreign investment increase, but the lack of foreign consumption make domestic FDI outflows flatten in the future. When domestic entry cost drops, declining the domestic wages, increasing foreign investor to make FDI to domestic country. In the meanwhile, capital inflows makes currency appreciation, domestic FDI outflows will also rise. When domestic FDI costs down, which increases foreign investment, in addition to increased domestic new entrants that will crowd total domestic consumption, and domestic output falling lead to depreciate, but salary declines larger, so that outflow of FDI firms still rise.