How is the flow of foreign funds into a country influenced by inflation in that country?

Foreign funds come into a country when investors outside
the country can make larger gains by investing in various assets in the country compared
to the gains they can make by investing in assets in their own
country.

For example, investors outside a country A would
buy stock in A rather than in their own country if the industrial growth in A is
expected to be very high and the price of stocks of companies located in A to rise a
lot. Similarly, if banks in A give a higher rate of interest for deposits, foreign
investors would prefer to invest their money in these
deposits.

When inflation rises in a country, the primary
financial institution in the country tries to reduce it by decreasing the money supply
in the system. This is usually done by increasing interest rates; as that makes it more
expensive for people to borrow money to buy products and also acts as an incentive for
people to save money with their deposits yielding higher
returns.

If interest rates of a country are substantially
higher, foreign funds flow into debt instruments there would rise. Conversely, as
economic growth is curtailed by high interest rates, there would be a decreased
investment in stocks and other assets which are negatively affected by high interest
rates.