Macroeconomic policy and exchange rate impacts on the foreign direct investment in ASEAN economies
by Mei Foong Wong; Chang Kah Fai; Yong Chen Yee; Lum Sook Cheng
International Journal of Economic Policy in Emerging Economies (IJEPEE), Vol. 12, No. 1, 2019

Abstract: ASEAN region has become one of the most attractive investment regions in the developing world which attracted significant amount of foreign direct investment (FDI) stock. Nevertheless, FDI inflows of the ASEAN region has shown increasing volatility which has given a renewed stimulus to research interest in the linkages between the macroeconomic policies, exchange rate and FDI inflows in ASEAN economies. This study examines the long-run relationship between macroeconomic policy, exchange rate and foreign direct investment in the selected ASEAN-four-plus-one countries from 1995 to 2015. The analysis was based on the panel unit root test, panel cointegration test, fully modified ordinary least squares estimator and dynamic ordinary least squares estimator. The results demonstrate that fiscal and monetary policies, exchange rate and FDI are cointegrated for the whole panel of countries. Furthermore, the panel estimators reveal that the relationship between macroeconomic policy, exchange rate and FDI is positive and statistically significant.

Online publication date: Fri, 29-Mar-2019

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