Open AccessThe Nexus of Selected Macroeconomic Variables toward Foreign Direct Investment: Evidence from Indonesia
Author(s) -
Noris Fatilla Ismail,
Suraya Ismail
Publication year - 2021
Publication title -
the journal of management theory and practice
Language(s) - English
Resource type - Journals
ISSN - 2716-7089
DOI - 10.37231/jmtp.2021.2.4.184
Subject(s) - foreign direct investment , nexus (standard) , distributed lag , economics , exchange rate , monetary economics , international economics , investment (military) , macroeconomics , econometrics , politics , computer science , law , political science , embedded system
Foreign direct investment (FDI) inflows are a major instrument of economic growth in developing countries. Indonesia is one of the developing countries that has received more FDI with macroeconomic stability. The macroeconomic stability indicator is seen as an important factor in driving economic growth and attracting FDI inflows in Indonesia. Therefore, this study examines the relationship of selected macroeconomic variables toward the FDI in Indonesia over the period 1980-2019. Using Autoregressive Distributed Lag (ARDL), the empirical results showed that market size, domestic investment, government spending and foreign exchange rate are key factors influencing long-run FDI inflows. However, financial development revealed no relationship with FDI inflows in Indonesia. Overall findings indicated that macroeconomic variables influence FDI inflows. These findings guided policymakers in formulating new policies to ensure macroeconomic indicators' stability in driving economic growth.