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This document examines the relationship between foreign direct investment (FDI) inflows and real interest rates in five ASEAN economies (ASEAN 5): Indonesia, Malaysia, Philippines, Singapore, and Thailand. It reviews theories and prior studies on determinants of FDI, develops a conceptual model relating FDI to interest rates, GDP, exchange rates, and inflation. Using secondary data from 1987-2012, it employs unit root tests, vector autoregression, and impulse response analysis and finds that real interest rates generally have a negative effect on FDI inflows for the ASEAN 5 economies. The empirical results vary for each country.

Education Economy & Finance Business

ROLE OF INTEREST RATE IN
ATTRACTING THE FDI:
STUDY ON ASEAN 5
Hira Aijaz Ahmed Siddiqui
Dr. Vesarach Aumeboonsuke
1

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

INTRODUCTION
 How investment is distributed among countries
on the basis of returns and security in the form of
interest rates?
Research Problem:
3

INTRODUCTION
 Examine the relationship of FDI inflows and real
interest rates in ASEAN 5 economy.
4
Research Objective:

LITERATURE REVIEWS
FDI theories:
 The production cycle theory
 Exchange market or imperfect capital
 The international theory
 The eclectic (OLI) paradigm of Dunning
5

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
6
Empirical Studies:

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

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:

METHODOLOGY
Techniques
1. Unit Test Root
2. Vector Auto Regression
3. Impulse Response Function.
9

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
10

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.
11

CONCLUSION
Malaysia
FDI
inflow
IR
GDP
INF
EXR
Thailand, Indonesia
Indonesia, Singapore,
Thailand
Indonesia,
Malaysia, Thailand
Indonesia, Malaysia,
Thailand
12
( - )
( +,-)
( - )
( - )

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

The main objective of our study is to determine the relationship of FDI with exchange rate volatility exchange rate and inflation. There are large numbers of FDI determinants but exchange rate is one of reflective determinant. Exchange rate extremely volatile due to its frailty to adopt the changes in international and domestic investment. In our study, we use time series data for FDI, exchange rate volatility, exchange rate, government consumption and domestic credit from 1980 to 2011 for Pakistan. Different time series econometrics techniques (volatility analysis, normality test, PP, unit root test) have been used for analysis. Results demonstrate that exchange rate volatility and inflation deter FDI while exchange rate has positive relationship with it.

Sw fs ppt

Miss. Antónia FICOVÁ, Engineer. (Not yet Dr.)

This document outlines a study on sovereign wealth funds and their impact on international finance. It includes the chapters layout, research objectives, methodology, a literature review and summaries of the most important findings and conclusions from testing several hypotheses. The research objectives are to analyze the impact of sovereign wealth funds on financial markets, national economies and host countries. The methodology includes both qualitative and quantitative analysis methods. The literature review defines sovereign wealth funds and notes they are state-owned investment funds composed of stocks, bonds and other assets.

Impact of fdi_in_bangladesh[1]

Naeem Jannat

This document summarizes research on the impact of foreign direct investment (FDI) in Bangladesh. It finds that while FDI in Bangladesh has fluctuated between $276 million and $1.7 billion annually since 2002, it has had a positive impact on GDP growth, especially in the agriculture sector. However, FDI is also hindered by problems like complicated bureaucracy, political unrest, lack of infrastructure like reliable power, and inconsistent policies. The document recommends ensuring good governance, coordinated agencies, accountability, and political and policy reforms to improve the environment for FDI in Bangladesh.

Foreign Direct Investment, Financial Development and Economic Growth

Mario Alvaracin

Rupee volatility in india by Abhishek Pande

Abhishek Pande

This study analyzes the impact of foreign capital inflows, including foreign direct investment (FDI) and foreign institutional investment (FII), on rupee volatility in India from 2006-2012. Using regression analysis, the study finds that FDI and FII have significant positive relationships with rupee volatility. Specifically, the regression model shows that for every unit increase in FDI, rupee volatility increases by 11.236 units, and for every unit increase in FII, rupee volatility increases by 6.668 units. The study recommends reducing fiscal deficits and relaxing some regulatory norms to attract more foreign investment and support reforms while cautiously managing rupee volatility.

Foreign direct-investment-in-india-a-critical-analysis-on-fdi

Ijcem Journal

This document analyzes foreign direct investment (FDI) in India. It begins with definitions of FDI and discusses India's changing approach to foreign investment over time. The document then outlines the study's objectives, hypotheses, methodology, and analytical tools. The objectives are to analyze trends, determinants, and impacts of FDI in India. The hypotheses are that FDI flows have increased over 2007-2011 and FDI positively impacts economic growth. Secondary data is used and statistical tools like trend and growth rate analysis are employed. A review of relevant literature on FDI determinants and impacts is also provided. In conclusion, the study aims to provide an understanding of FDI inflows to India from 2007-2011.

EC4417 Econometrics Project

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This document describes a statistical analysis of the relationship between market share, R&D expenditure, and advertising in the technology industry. The analysis found that R&D expenditure has a statistically significant positive relationship with market share, while the relationship between advertising and market share was not statistically significant. Some key findings are that a 20% increase in R&D would yield a 0.6% increase in market share, while the same increase in advertising would yield a 0.08% increase. Diagnostic tests found no issues with model specification or assumptions.

Econometrics project final edited

Prashanth Pamidipati

This document analyzes factors that affect the prices of red wine. It establishes a regression model with the log price of red wine as the dependent variable, and average winter rainfall, seasonal temperature, and harvest rainfall as independent variables. The model explains 74% of variation in price. Hypothesis testing shows that all three weather factors significantly impact price individually and overall. Specifically, higher winter rainfall and temperature increase price, while more harvest rain decreases price. The analysis concludes weather is a major determinant of red wine prices and quality between vintages.

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Determinants And The Impact Foreign Investment To Economic Growth And Unemplo...

iosrjce

This study aims to find the determinants of foreign direct investment coming into the Java-Bali and analyze the impact of foreign investment on economic growth and unemployment in the Java-Bali. The research methodology used in this research is quantitative method using secondary data 2004-2012 period, using key informants and some informants who cooperate with foreign investors for a deeper investigation of some of the results of this study. This study uses Path analysis through partial least square (PLS). The study found wages and no significant negative impact on FDI, Economic Stability does not significantly affect the FDI, Human Capital and significant positive effect on FDI, Human Capital and significant positive effect on wages, FDI positive and significant impact on economic growth, FDI effect positive and significant impact on unemployment. Results of this study have implications for practical namely: 1) Changes in wages that always happens every year in Java and Bali does not affect foreign investment, 2) Changes in economic stability did not result in changes in foreign investment, 3) Changes in human capital resulted in a change in planting foreign capital, 4) Changes in human capital resulted in a change in wages, 5) Changes in foreign investment will lead to changes in economic growth, 6) Changes in foreign investment resulted in changes in unemployment. This affects the results of theoretical research on: 1) Strengthening existing theories such as: The Theory of Differential Rates of Return Hypothesis, Theory vicious circle of Nurkse, Harrod Domar growth theory, growth theory Solow, Romer growth theory, theory of acceleration; 2). Not in line with the theory as: Country Risk Hypothesis Theory, Theory of The Location Hypothesis, theory of capital accumulation Jhingan, balanced growth Doctrine

81Journal of International Studies© Foundation .docx

taishao1

81 Journal of International Studies © Foundation of International Studies, 2015 © CSR, 2015 S ci en ti fi c P ap er s Wuhan, Li Suyuan, Adnan Khurshid Ocean University of China China [email protected] Abstract. Th e main reason of this study is to test the interest rate impact on investment in Jiangsu Province of China. Jiangsu has the largest quantity of investment in China. For long run, nexus Johansen Co-integration test is employed. Whereas, vector er- ror correction model (VECM) is used to fi nd short run association over the period of 2003-2012. Th e results indicate that there is a long-term relationship association among variables. It has negative relation in the long run but positive in short run. Th is research also produces suggestions that will help in terms of interest rate policy as well as improving investment that promotes economic growth in Jiangsu Province. Keywords: Interest rate, investment, Jiangsu Province, VECM JEL Codes: E40, E20, C22 INTRODUCTION Changes in interest rates can refl ect the basic situation of the operation of macro economy; it also eff ects all the macroeconomic variables such as GDP, price level, the level of employment, international balance of payments, the rate of economic growth, etc. Obviously the interest rate is an important economic variable that plays an important role in both macro and micro economy activity. Th erefore, a change in interest rates is one of the main factors to judge the macroeconomic situation and the interest rate trend analysis is the main method to predict the macroscopic economic situation. Western economists believe that the market rate of interest, the total social savings and investment are closely linked. Th erefore, the current interest rates aff ect the investment activities. At the same time, current interest rates also aff ect the scale of investment in the future by adjusting the savings. If the interest rate rises, bond prices fall, if the interest rate falls, bond prices rise. Th e infl uence of interest rate on investment scale is operate as the opportunity cost of investment on total investment, Under the condition of unchanged in investment income, the rising interest rates increase the cost of investment and then inevitably cause lower income investors to withdraw from the area of investment, so that the demand for investment is reduced. However, falling interest rates means that investment costs decline, thereby stimulating investment and the total social investments increase. Received: February, 2015 1st Revision: April, 2015 Accepted: May, 2015 DOI: 10.14254/2071- 8330.2015/8-1/7 Th e eff ect of interest rate on investment; Empirical evidence of Jiangsu Province, China Wuhan, Li Suyuan, Adnan Khurshid “Th e eff ect of interest rate on investment; Empirical evidence of Jiangsu Province, China”, Journal of International Studies, Vol. 8, No 1, 2015, pp. 81-90. DOI: 10.14254/2071-8330.2015/8-1/7 Journal .

81Journal of International Studies© Foundation .docx

evonnehoggarth79783

The impact of foreign direct investment [fdi] on poverty reduction in nigeria

Alexander Decker

Determinants of Foreign Direct Investment (FDI) in Malaysia: What Matters Most?

Nursuhaili Shahrudin

1. The study examines the determinants of foreign direct investment (FDI) inflows to Malaysia from 1970 to 2008 using the autoregressive distributed lag (ARDL) framework. 2. The results suggest that financial development, as measured by money supply, and economic growth, as represented by GDP, have a positive impact on FDI inflows to Malaysia in the long run. 3. A developed financial system and high economic growth rate help create a favorable environment for foreign investors and are important for attracting FDI to Malaysia.

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Diana Dwi Astuti

idmac2015

Impact of openness, foreign direct investment, gross capital formation on eco...

Alexander Decker

This document summarizes a study that assessed the impact of openness, foreign direct investment, and gross capital formation on economic growth in Kenya from 1960 to 2010. A multiple linear regression model was used to analyze data from the World Bank. The findings showed that trade openness had a positive and significant impact on GDP growth. However, foreign direct investment and gross capital formation did not have a significant effect on GDP growth. The study recommends that policymakers in Kenya emphasize increasing trade openness to promote economic growth.

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International Journal of Economics and Financial Research

This study aims to analyze the effect of foreign direct investment (FDI) on new job creation, and pays attention to factors interrelated to employment by using the case of Afghanistan. Using time series data form 2003 to 2017, this paper explore the driving forces and reduction potentials of employment in Afghanistan with consideration for dynamic changes within the traditional OLS and standardize OLS model. The results show that exchange rate plays a dominant role in increasing employment in Afghanistan. And exports and inflation rate plays a dominant role in decreasing employment in Afghanistan. All variables are co-integrated and the analysis of the impulse response function and variance decomposition turns out to be synchronous. Furthermore, in the short run export and inflation rate are more critical in reduction potentials of employment in Afghanistan. Policies should be advised to control inflation rate and illegal export and improve the investment projects to attract more FDI into the economy for quick adjustment purpose in case of the shock to the system.

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Baljeet Poonia

This document is a research paper from the UTMS Journal of Economics that analyzes India's foreign direct investment (FDI) by looking at its current status, issues, and policy recommendations. Some key points: - India has seen a large increase in FDI inflows in recent decades but still receives less than China. FDI is dominated by investments from Mauritius, Singapore, the US, and UK. - While FDI can benefit an economy, it also poses issues like threats to domestic businesses and potential exploitation of resources. India needs policies to ensure FDI contributes to long-term development goals. - The paper aims to analyze FDI trends in India, identify reasons for lower inflows

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AI Publications

Foreign direct investment is essential for economic growth of a country. It acts as a promoter for the economic development of a country. Keeping this in mind, the objective of this study is to determine the effect of macroeconomic variables such as interest rate, real exchange rate,inflation rate and stock market on foreign direct investment in Pakistan. For this purpose,study used the authentic annual data for the period of 27 years i.e. from 1990-2016. We are use for analysis E-View software, The empirical analysis involved using the ADF test to check the stationary of the data.Results revealed that interest rate and exchange rate have significant negative effect on FDI and stock market index has negative and unsignificant effect on FDI while inflation rate has positive and significant effect on FDI.

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Ankur Pandey

This document provides an overview of foreign direct investment (FDI) in India. It discusses the current status of FDI in India, key issues, and policy recommendations. Some of the main points covered include: - India has emerged as an attractive FDI destination, particularly in services, but needs to develop more as a manufacturing hub. - The largest sources of FDI for India are Mauritius, Singapore, the US, and the UK. However, FDI flows to India are still lower than China. - Key sectors receiving FDI are services, software/hardware, telecom, real estate, and power. However, FDI is concentrated in a few states and regions like Mumbai and Delhi.

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Fakir Tajul Islam

This paper examines the institutional and macroeconomic determinants of stock market performance using data in the last 20 years starting from 1995 to 2015. In this paper, Gross Domestic Product (GDP), Consumer Price Index (CPI), inflation rate and Foreign Direct Investment (FDI) inflows were used as the proxy of macroeconomic determinants, whereas market capitalization, total issued capital and market turnover of Dhaka Stock Exchange were the proxy of institutional determinants of capital market performance.

Impact of political stability on the macroeconomic variables and FDI of Pakis...

journal ijrtem

Abstract: In this paper we have discussed the vital role of political stability on the link between macroeconomic variables and FDI .For this purpose we have used a data of year 1991 to 2011.In this empirical analysis we have used ADF test for the checking the stationary of the data and other software’s are SPSS and eviews.This result of this study have made sure that import ,BOP, export and GDP growth rate have significant impact on the FDI inflows in the Pakistan and inflation has a negative impact on the FDI based on this research has proved that political stability is crucial for the expansion of foreign direct investment. Keywords: political stability, ADF, BOP, crucial etc.

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This document summarizes a study that examined factors affecting foreign direct investment (FDI) flows to Ethiopia from 1990 to 2011. The study used a multiple regression model to analyze the relationship between FDI inflows as a percentage of GDP (the dependent variable) and five independent variables: market size, trade openness, inflation rate, infrastructure, and human capital. Time series data from 1990 to 2011 on these variables was obtained from the World Bank and analyzed. The findings showed that trade openness and inflation rate had a significant impact on FDI flows to Ethiopia, while no clear relationship was found for market size, infrastructure, and human capital.

Impact of flow of fdi on indian capital market

Alexander Decker

This document summarizes a study on the impact of foreign direct investment (FDI) inflows on the Indian stock market. The study analyzed data on annual FDI inflows to India from 2001 to 2011 and the corresponding values of the BSE Sensex and CNX Nifty indices. Statistical analysis showed a strong positive correlation between FDI inflows and both indices, with the FDI inflows explaining around 82% of the variation in the indices. The study concluded that trends in FDI inflows to India have a dependent relationship with trends in the two stock market indices.

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Business, Management and Economics Research

This study brings to an academia table the discussion on whether investment incentives are a motivator or a gift and also explores the moderating effects of Investors‟ Perceptions on Stock market Performance. By use of key word characters the search initially identified 93 published and unpublished research papers and after a tentative scrutiny, 66 papers were selected in a random sampling manner in order to give the birth to this discussion paper. Exploratory research design was used. The key objective of this article was to investigate on the question as to whether incentives are a gift or a motivator. The study findings reveal than investor perceptions affects stock market performance more than incentives do. The paper concludes that the availability, adequacy, and timeliness of relevant information about marketable securities are important for both pricing efficiency and market confidence. Investment incentives work well in an ideal world to promote investment while investors‟ perceptions are relevant in the real world. Hence, stock market incentives were concluded as being a gift and not a motivator for investors to make investment decisions at the stock market.

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