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Macroeconomic policy and exchange rate impacts on the foreign direct investment in ASEAN economies

Author

Listed:
  • Mei Foong Wong
  • Chang Kah Fai
  • Yong Chen Yee
  • Lum Sook Cheng

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.

Suggested Citation

  • Mei Foong Wong & Chang Kah Fai & Yong Chen Yee & Lum Sook Cheng, 2019. "Macroeconomic policy and exchange rate impacts on the foreign direct investment in ASEAN economies," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 12(1), pages 1-10.
    • Handle: RePEc:ids:ijepee:v:12:y:2019:i:1:p:1-10
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    Cited by:

    1. Michael Takudzwa Pasara & Rufaro Garidzirai, 2020. "Causality Effects among Gross Capital Formation, Unemployment and Economic Growth in South Africa," Economies, MDPI, vol. 8(2), pages 1-12, April.
    2. Depren, Özer & Kartal, Mustafa Tevfik & Kılıç Depren, Serpil, 2021. "Changes of gold prices in COVID-19 pandemic: Daily evidence from Turkey's monetary policy measures with selected determinants," Technological Forecasting and Social Change, Elsevier, vol. 170(C).
    3. Vissa, Siva Kameswari & Thenmozhi, M., 2022. "What determines mergers and acquisitions in BRICS countries: Liquidity, exchange rate or innovation?," Research in International Business and Finance, Elsevier, vol. 61(C).

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