This presentation was done in June 2014 by one of our participants in ICST and ICBELSH conferences.

1. ROLE OF INTEREST RATE IN
ATTRACTING THE FDI:
STUDY ON ASEAN 5
Hira Aijaz Ahmed Siddiqui
Dr. Vesarach Aumeboonsuke
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2. INTRODUCTION
FDI:
investment accross borders in global economy.
Effects:
Increased volume of investment(Sethi 2003),
Efficiency, influence economic growth
(chowdhury2006), etc.
Relation of FDI with different variables:
GDP growth (chakrabarti 2001), Inflation rate
(singhania 2011),Trade deficit (chakrabarti 2001). 2

3. INTRODUCTION
 How investment is distributed among countries
on the basis of returns and security in the form of
interest rates?
Research Problem:
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4. INTRODUCTION
 Examine the relationship of FDI inflows and real
interest rates in ASEAN 5 economy.
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Research Objective:

5. LITERATURE REVIEWS
FDI theories:
 The production cycle theory
 Exchange market or imperfect capital
 The international theory
 The eclectic (OLI) paradigm of Dunning
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6. LITERATURE REVIEW
Determinants Positive
significant
Negative
significant
Methodology
Interest rates
•3,(Cavallari, 2012)
•4,(Aw, 2010)
•5,(Arbatli, 2011)
•1,(Cavallari, 2012)
•2,(Onyeiwu, 2004)
•1, Baseline
regression method
•2, The fixed effects
model, random effect
mode
•3, Two step
procedure
•4, Engle-granger test
and OLS
•5, dynamic panel
regression and two-
step system GMM
estimator
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Empirical Studies:

7. CONCEPTUAL MODEL:
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(H4: +,-)
(H3,-)
(H2: +)
Foreign Direct
Investment inflow
Interest Rates
Gross Domestic
Product
Exchange Rates
Inflation
(H1: +,-)

8. METHODOLOGY
secondary data (1987-2012).
 FDI inflow, Inflation, GDP, Exchange rate
International Financial Statistics (IFS)
 Real Interest Rates
World Bank indicators(2014) in world Bank
website. 8
Data Collection:

9. METHODOLOGY
Techniques
1. Unit Test Root
2. Vector Auto Regression
3. Impulse Response Function.
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10. EMPIRICAL RESULTS
 Unit test roots:
All analyzed series could be individually
considered as being integrated of first order
I (1) and second order I (2).
 IRF:
IR has negative effect on FDI.
Malaysia, Singapore, Philippine and Thailand
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11. EMPIRICAL RESULTS
VAR
 Negative linkage
Indonesia, Malaysia and Thailand
 No significant relation
Singapore and Malaysia
 No impact of GDP.
 Exchange rates varies.
 inflation as price stability.
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12. CONCLUSION
Malaysia
FDI
inflow
IR
GDP
INF
EXR
Thailand, Indonesia
Indonesia, Singapore,
Thailand
Indonesia,
Malaysia, Thailand
Indonesia, Malaysia,
Thailand
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( - )
( +,-)
( - )
( - )

13. Questions ?
Thank You
Date: 15 –june-
2014.
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