THE INFLUENCE OF MACROECONOMIC AND INSTITUTIONAL FACTORS ON FOREIGN DIRECT INVESTMENT IN SOUTH-EAST ASIAN COUNTRIES
DOI:
https://doi.org/10.5281/zenodo.17448275Abstract
This research seeks to determine the factors affecting FDI inflows into a country, analyzing institutional variablessuch as rule of law and political stability rating and macroeconomic and fnancial indicators such as inflation, interest
rates, and market capitalization of domestically listed companies. Utilizing panel data for 3 ASEAN countries (Malaysia,
Indonesia, Singapore), the study performed fxed OLS regression analysis using Stata 18.0, and the output model shows
a statistically signifcant explanatory power with R squared of 0.0604. Main fndings are inflation (p = 0.009), market
capitalization rate (p = 0.000), and interest rate (p = 0.003) have statistically signifcant positive effects on FDI, market
capitalization rate being the strongest one affecting FDI. While political stability and rule of law are theoretically signifcant,
the data shows weak influence of these variables on FDI. These results suggest that policymakers should prioritize
fnancial incentives and develop good fnancial infrastructure should they want to attract more FDI.
Keywords
FDI, political stability, rule of law, interest rate, market capitalization of domestic companies, inflation.References
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