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Prudent Macro Management of the Economy and Inward FDI in ASEAN Member States

Author

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  • Shah, Mumtaz Hussain
  • Zeb, Aisha

Abstract

The current research work considers the effect of prudent macroeconomic management of the host economy on inward foreign direct investment in Association of South East Asian Nations member states. This research use annual data of nine ASEAN countries namely: Brunei, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam for twenty years from 1991 to 2010. The results obtained with random effect panel estimation technique manifests the importance of judicious management of the economy. Steady but relatively slow and predictable decline of the host currency exchange rate have a positive significant effect. However, contrary to expectations inflation though have a negative sway still the effect is insignificant. The conventional FDI location drivers such as market size, development level, and provision of human capital proxied by tertiary education also exert a significant positive sway. Contrary to theoretic wisdom extent of economic liberalisation and primary or secondary education had the expected coefficient but failed to reach the needed significance level.

Suggested Citation

  • Shah, Mumtaz Hussain & Zeb, Aisha, 2017. "Prudent Macro Management of the Economy and Inward FDI in ASEAN Member States," MPRA Paper 107249, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:107249
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    References listed on IDEAS

    as
    1. Shah, Mumtaz Hussain & Khan, Atta Ullah, 2017. "Factors determining capital structure of Pakistani non-financial firms," MPRA Paper 82015, University Library of Munich, Germany.
    2. Shah, Mumtaz Hussain, 2017. "The Significance of WTO’s Trade Related Investment Measures (TRIMs) Agreement For Inward FDI in Sub-Saharan Africa," MPRA Paper 82009, University Library of Munich, Germany.
    3. repec:ebl:ecbull:v:6:y:2005:i:20:p:1-8 is not listed on IDEAS
    4. Shah, Mumtaz Hussain, 2016. "Financial development and foreign direct investment: The case of Middle East and North African (MENA) developing nations," MPRA Paper 82013, University Library of Munich, Germany.
    5. Mumtaz Hussain Shah & Yahya Khan, 2016. "Trade Liberalisation and FDI Inflows in Emerging Economies," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 8(1), pages 35-52, April.
    6. Shah, Mumtaz Hussain & Jamil, Iqra, 2016. "Trade Agreements and Transnational Corporations Presence in the Developing Asia," MPRA Paper 107250, University Library of Munich, Germany.
    7. Shigeyuki Hamori & Ivohasina Razafimahefa, 2005. "An Empirical Analysis of FDI Competitiveness in Sub-Saharan Africa and Developing Countries," Economics Bulletin, AccessEcon, vol. 6(20), pages 1-8.
    8. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    9. Mumtaz Hussain Shah, 2017. "Inward FDI in East Asian & Pacific Developing Countries due to WTO Led Liberalisation," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(2), pages 1-20, June.
    10. Parajuli, Shanta & Kennedy, P. Lynn, 2010. "The Exchange Rate and Inward Foreign Direct Investment in Mexico," 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida 56459, Southern Agricultural Economics Association.
    11. Mumtaz Hussain Shah & Anum Gul Afridi, 2015. "Significance of Good Governance for FDI Inflows in SAARC Countries," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 7(2), pages 31-52, October.
    12. Osinubi, T. S. & Amaghionyeodiwe, L. A, 2009. "Foreign Direct Investment and Exchange Rate Volatility in Nigeria," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 9(2).
    13. Shah, Mumtaz Hussain & Khan, Sajjad, 2017. "Factors Effecting Commercial Banks Profitability in Pakistan," MPRA Paper 82016, University Library of Munich, Germany.
    14. Khachoo, Ab Quyoom & Khan, Mohd Imran, 2012. "Determinants of FDI inflows to developing countries: a panel data analysis," MPRA Paper 37278, University Library of Munich, Germany.
    15. Shah, Mumtaz Hussain, 2016. "The Effect of Macroeconomic Stability on Inward FDI in African Developing Countries," MPRA Paper 82014, University Library of Munich, Germany.
    16. Shah, Mumtaz Hussain & Ali, Zahid, 2016. "What Drives Foreign Direct Investment to BRICS?," MPRA Paper 107252, University Library of Munich, Germany.
    17. Sung C. No & Andrew Muhammad & Caleb Tamwesigire & Fred Mugisha, 2008. "Determinants of FDI inflows into Rwanda: 1971–2003," International Journal of Financial Services Management, Inderscience Enterprises Ltd, vol. 3(2), pages 200-212.
    18. Dauti, Bardhyl, 2008. "Determinants of Foreign Direct Ivestment inflow in South East European Countries - Panel Estimation," MPRA Paper 18273, University Library of Munich, Germany.
    19. Mumtaz Hussain Shah, 2017. "Political Institutions and the Incidence of FDI in South Asia," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(1), pages 21-42, March.
    20. Shah, Mumtaz Hussain & Faiz, Mehreen, 2015. "Terrorism and Foreign Direct Investment: An Empirical Analysis of SAARC Countries," MPRA Paper 82008, University Library of Munich, Germany.
    21. Mumtaz Hussain Shah & Saba Qayyum, 2015. "Impact of Double Taxation Treaties on Inward FDI in Latin American and Caribbean Developing Countries," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 7(1), pages 1-18, April.
    22. Schneider, Friedrich & Frey, Bruno S., 1985. "Economic and political determinants of foreign direct investment," World Development, Elsevier, vol. 13(2), pages 161-175, February.
    23. Alex Ehimare OMANKHANLEN, 2011. "The Effect of Exchange Rate and Inflation on Foreign Direct Investment and Its Relationship with Economic Growth in Nigeria," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 1, pages 5-16.
    24. Yuqing Xing & Guanghua Wan, 2006. "Exchange Rates and Competition for FDI in Asia," The World Economy, Wiley Blackwell, vol. 29(4), pages 419-434, April.
    25. Khachoo, Ab Quyoom, 2012. "Determinants of FDI inflows to developing countries: a panel data analysis," MPRA Paper 94131, University Library of Munich, Germany.
    26. Hong Hiep HOANG, 2012. "Foreign Direct Investment In Southeast Asia: Determinants And Spatial Distribution," Working Papers 30, Development and Policies Research Center (DEPOCEN), Vietnam.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Shah, Mumtaz Hussain, 2018. "Corruption & Foreign Direct Investment: The Case of South Asia," MPRA Paper 107253, University Library of Munich, Germany.
    2. Shah, Mumtaz Hussain & Azam, Ayesha, 2018. "Financial Development and Investors Location Choice in The Arab World," MPRA Paper 107245, University Library of Munich, Germany.
    3. Shah, Mumtaz Hussain & Khan, Faisal, 2019. "Telecommunication Infrastructure Development and FDI into Asian Developing Nations," MPRA Paper 107255, University Library of Munich, Germany.

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    More about this item

    Keywords

    Prudent Macroeconomic Management; Panel Data; ASEAN countries;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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