Jurnal Ekonomi Pembangunan
Vol. 21 No. 02 (2023): Jurnal Ekonomi Pembangunan

The Impact of Macroeconomic Factors on Foreign Direct Investment in Indonesia from 2007 To 2022: A Vector Error Correction Model (VECM) Approach

Hafidz Zainul Mustofa (IAIN Ponorogo)
Moh. Faizin (Sharia Economics Study Program, Faculty of Economics and Islamic Business, IAIN Ponorogo)



Article Info

Publish Date
31 Dec 2023

Abstract

This study will examine the impact of macroeconomic factors on FDI. The gap in this study lies in the significant changes in economic conditions and investment policies in Indonesia since 2007, which previous studies have not fully explained. The possibility of new factors affecting FDI flows requires more sophisticated analyses. In addition, the relevance of internalized investment theory in the current context of economic globalization has not been widely explored in FDI research in Indonesia. This study uses Secondary time series data and quantitative research techniques. Quarterly data from 2007 to 2022 is the data set used. The research employs the Vector Error Correction Model data analysis technique, with a significance level of 5%. The findings indicate that the exchange rate has an insignificantly negative short-term impact on FDI and a significant negative long-term impact. Then, inflation has a short-term positive and insignificant impact on FDI but a significant negative in the long term. Meanwhile, the interest rate has a significant positive effect on FDI in the long term, but in the short term, it has a negative and insignificant effect.

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Journal Info

Abbrev

jep

Publisher

Subject

Economics, Econometrics & Finance

Description

Jurnal ekonomi pembangunan published by Pusat Pengkajian Ekonomi dan Kebijakan Publik (PPEKP), Faculty of Economics and Business, University of Muhammadiyah Malang. This journal is used as a source of information about scientific works in the field of development economics for every academician, ...