Determinants of foreign direct investment and volatility in South East Asian economies (original) (raw)

Impact of Crisis Towards Foreign Direct Investment (FDI) in Eight Selected Asia Countries

2016

This paper is being titled as "Impact of Crisis Towards Foreign Direct Investment (FDI) in Eight Selected Asia Developing Countries.". Foreign Direct Investments (FDI) is an essential external financial source for every nation for which FDI will be used to promote or boost up a nation's economic growth. Therefore, the main objective of this paper is to determine the relationships between FDI inflows, GDP growth rate, exchange rate, level of infrastructure and also the presence of financial crisis in the context of developing countries. This study is crucial and vital to be conducted since the fluctuation of FDI inflows will directly affect the economic performance of a developing nation. Thus, a more in-depth analysis will be carried out to analyze the relationships. In a nutshell, this study will provide readers a better understanding on the behavior of economic changes towards the level of FDI inflows of developing nations.

Determinants of Foreign Direct Investment Inflows in Asia and the Pacific Region Ways Forward

International Review of Management and Development Studies, 2018

The study examined the nexus between FDI net inflows, GDP growth rate, degree of financial openness, gross fixed capital formation, inflation, industry value added, and corporate tax rates in Asia and the Pacific Region for the period 2002-2015. It also explored the determinants’ effect on FDI inflows before and after the financial crisis. For the three (3) panel regression models (pooled OLS, fixed effects, and random effects) using aggregate data, random effects model was preferred in explaining the relationship between FDI inflows and its determinants. There is strong evidence of a positive impact of degree of openness and GFC while a strong negative impact of corporate tax rate on FDI inflows. As the majority are low-income and middle-income countries, conducive business environment for FDI to flourish through better tax and lower inflation rates were provided. On the other hand, mixed results were generated for the impact of Global crisis where a fixed effect was preferred over random effects model. Trade openness and corporate tax rates were found to be significant predictors of FDI net inflows before the crisis. After the crisis, consumer price index and inflation showed positive and significant effects, which are deemed to provide negative implications to most countries due to high cost of investments. The results provides certain policy implications for the countries in the region where FDI inflows can be influenced by the type of incentives provided by host country and the attractiveness of the domestic businesses which have not been too vibrant for international business to consider capital investments.

Outward foreign direct investment and the financial crisis in developing East Asia

Asian Development Review: Studies of Asian and …, 2009

This paper examines two interrelated aspects of Asian economic dynamism and the management of external shocks, in the context of outward foreign direct investment (FDI) from developing East Asia. Outward FDI from these economies has been growing rapidly, driven by deeper economic integration, more open FDI regimes, growing technological and financial sophistication, and rising savings levels. The paper underlines these common region-wide determinants while pointing to a range of country-specific circumstances. Economic crises, such as the Asian financial crisis of 1997-1998 and the current global financial crisis, have large and unpredictable effects on the behavior of FDI and other forms of capital flow, with the general expectation that FDI will be less volatile than portfolio investment. This has been confirmed in both crisis episodes. Investment outcomes during the current crisis have accelerated the growing importance of developing East Asia in the global economy.

Determinants of FDI inflow in Asia

Journal of Emerging Economies and Islamic Research

The research analyses the determinants of FDI inflow in Asia for the period 1993-2013 and is based on the fixed effect model. The macroeconomic factors included are lending rate, GDP per capita, trade openness, debt, exchange rate, money supply and unemployment rate. The country specific factors included are adult literacy rate, gross fixed capital formation, domestic credit provided by the financial sector, environmental pollution and natural resources rents. The study applies panel unit root tests, panel cointegration analysis and panel regression analysis based on the fixed effect model to ascertain the significance of macroeconomic and country specific factors on FDI inflow in Asia. The study found that lending rate, trade openness and money supply have a positive significance to FDI per capita whereas debt, unemployment rate and environmental pollution have a negative significance to FDI per capita.

Foreign Direct Investments in Southeast Asia

The Handbook of Southeast Asian Economics, 2014

Foreign direct investment has been of great importance in economic growth and global economic integration over the last decades. South East Asia has been part of this development with rapidly increasing inflows of FDI. However, there are large variations over time and between countries in the region as regard to the policies towards FDI, and in actual inflows of FDI. This chapter aims at examining the size of FDI in South East Asia and the trends in it. The main determinants of FDI in Southeast Asia as well as their effect on the host countries are also discussed and examined.

FDI and Government Policy in light of the Asian Financial Crisis

FDI investment continues to play a large role in creating new jobs in East Asia. This paper examines the relationship between FDI, exchange rate changes, and infrastructure spending on job creation before and after the Asian Financial Crisis. The relevant literature on the subject has been reviewed and a statistical analysis has been carried out. The findings show that one unit of FDI created more jobs before the Asian Financial Crisis but mainly due to the contribution of other factors such as government infrastructure spending which augmented financial inflows. After the crisis FDI effect on job creation decreased as an absolute value, but due to the decrease in other contributing factors a greater percentage of new employment became reliant on FDI as its source. Secondary findings include the effect that exchange rate changes have had on FDI levels and job creation, namely that they differ before and after the crisis. As well, infrastructure spending has becomes an ever more important factor in attracting FDI after the financial crisis.

MACROECONOMIC FACTORS OF FDI INFLOWS IN ASIAN ECONOMIES: A STUDY OF 14 ASIAN COUNTRIES.

International Journal of Advanced Research (IJAR), 2019

The study conducted to analyze the relationship between foreign direct investment and macroeconomic factors, which were affecting foreign direct investment in Asian economies over the period of 2003 to 2017. The fixed effect model applied in order to anticipate the foreign direct investment inflow into the overall Asian economies and simple regression analysis organized for each economy individually to determine the foreign direct investment inflow. The result of the fixed effect model presented strong evidence that trade openness has a statistically significant and affirmative association with foreign direct investment inflow into different Asian economies. On the other hand, exchange rate found closer to significance with foreign direct investment inflow. However, the macroeconomic variables of the study jointly and significantly affected foreign direct investment inflow. The results of simple regression analysis found that GDP, trade openness, and exchange rate have a significant impact on foreign direct investment inflow in China, Indonesia, Jordan, Pakistan, and Vietnam. Meanwhile, labor cost and tax rate have positive significance to foreign direct investment in Hong Kong and Philippines. The conclusive remarksare that macroeconomic factors played a significant and decisive role to attract foreign direct investment in the Asian region and in each country as well.