Dynamics of Foreign Direct Investment Manufacturing Sector in Indonesia

Saparuddin Mukhtar (Faculty of Economics, Universitas Negeri Jakarta, Indonesia)
Dicky Iranto (Faculty of Economics, Universitas Negeri Jakarta, Indonesia)
Riana Raudha Adni (Faculty of Economics, Universitas Negeri Jakarta, Indonesia)

Jurnal Pendidikan Ekonomi & Bisnis
Vol 7 No 2 (2019): Jurnal Pendidikan Ekonomi & Bisnis (DOAJ & SINTA 2 Indexed)

This research was conducted to determine the short-term and long-term effects between Gross Domestic Product, Interest Rates, and Inflation on Foreign Direct Investment in the manufacturing sector for the period 2004-2017. Study applied VECM (Vector Error Correction Model), secondary data obtained from Bank Indonesia, BPS, and Bappenas. Based on the statistical results it can be concluded that: first, GDP has a positive and not significant effect in the short term, then in the long run, it has a negative effect toward FDI. Second, in the short term interest rates have a negative and not significant while in the long term interest rates have a negative and significant effect on FDI in the manufacturing sector. Lastly, inflation has a negative and insignificant effect, while, in the long-run inflation has a positive and significant effect on FDI in the manufacturing sector.