scholarly journals Determinants and Causality of Current Account Balance and Foreign Direct Investment: Lower Middle Income Countries in ASEAN

2020 ◽  
Author(s):  
Hasdi Aimon ◽  
Anggi Putri Kurniadi ◽  
Sri Ulfa Sentosa
Keyword(s):  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Current Account ◽  
Direct Investment ◽  
Current Account Balance ◽  
Middle Income ◽  
Middle Income Countries ◽  
Real Gdp ◽  
Foreign Direct Investment Determinants

This study investigates the determinants and causality between current account balance and foreign direct investment in Association of Southeast Asian Nations (ASEAN) in lower middle income countries. This study uses time series from 2000-2017 and cross section of 6 countries, namely Indonesia, Philippines, Vietnam, Lao, Myanmar and Cambodia, which were analyzed using simultaneous equation model approach. There are three important findings in this study. First, current account balance is positively affected by financial development, government expenditure, real GDP and real exchange rate, while negatively affected by foreign direct investment. Second, foreign direct investment is positively affected by real GDP, real exchange rate, economic openness and current account balance, while negatively affected by inflation. Third, there is a causal relationship between current account balance and foreign direct investment, which the two variables significantly influence each other. Therefore, it is highly recommended for lower middle income countries in ASEAN to intervene in macroeconomic policy variables, so that the deficit conditions for current account balance and foreign direct investment can be reduced in the lower middle income countries in ASEAN. Keywords: current account balance, foreign direct investment, determinants, causality, lower middle income countries, ASEAN.

scholarly journals Analysis of Current Account and Real Exchange Rate: Lower Middle Income Countries in Association of Southeast Asian Nations

2019 ◽  
Vol 8 (5C) ◽  
pp. 662-668
Keyword(s):  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Current Account ◽  
Direct Investment ◽  
Real Exchange Rates ◽  
Middle Income ◽  
Negative Effect ◽  
Positive Effect

The study investigates the simultaneous equation model of the current account and real exchange rates in group of lower middle income in Association of Southeast Asian Nations (ASEAN). This study uses time series from 2000-2017 (18 years) and cross section 6 countries (Indonesia, Philippines, Vietnam, Lao, Myanmar, and Cambodia). There are three important findings in this study; first, for the current account is financial development has positive effect while government spending and foreign direct investment have negative effect; second, for the real exchange rate is economic openness, money supply, and interest rate have positive effect while foreign direct investment and current account have negative effect; third, only current account affects real exchange rates. Therefore, it is highly recommended for group of lower middle income in ASEAN to intervene in monetary policy variables so that uncontrolled deficits and fluctuations can achieve equilibrium in group of lower middle income in ASEAN.

scholarly journals Exchange Rate Volatility and Foreign Direct Investment

2020 ◽  
Vol 12 (3) ◽  
pp. 38
Author(s):  
Samuel Erasmus Alnaa ◽  
Ferdinand Ahiakpor
Keyword(s):  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Interest Rate ◽  
Gross Domestic Product ◽  
Real Exchange Rate ◽  
Direct Investment ◽  
Exchange Rate Volatility ◽  
External Factors ◽  
Conditional Heteroskedasticity ◽  
Data Set

The paper seeks to determine the effect of exchange rate volatility on foreign direct investment in Ghana from 1986 to 2017. The study adopted the Generalized Autoregressive Conditional Heteroskedasticity model to fit the data set from 1986-2017. The results indicate that, previous quarter information can influence current quarter volatility in Foreign Direct Investment. Real exchange rate, gross domestic product and treasure bill rate considered as external factors, are all found to be significant. This shows that, volatility from these factors can spillover to volatility in foreign direct investment.  To ensure stable inflow of foreign direct investment, we recommend that policies should gear towards stability in the forex market and interest rate among others.

scholarly journals Current account determinants in ASEAN 6

2018 ◽  
Vol 21 (2) ◽  
Author(s):  
Novi Ariyani ◽  
Fajar Wahyu Priyanto ◽  
Lilis Yuliati
Keyword(s):  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Interest Rate ◽  
Gross Domestic Product ◽  
Current Account ◽  
Direct Investment ◽  
Domestic Product ◽  
Annual Data ◽  
The Current Account

This study aims to analyze the factors that influence the export activity in the ASEAN region countries such as Indonesia, Singapore, Thailand, Malaysia, Philippines and Vietnam during 2001 - 2016 by using annual data. The factors that influence gross domestic product (GDP), interest rate, foreign direct investment (FDI) and exchange rate. The method used in the research is panel Vector Error Correlation Model (PVECM). The results show that Gross Domestic Product (GDP) negatively affects the current account in the short term. The interest rate variable negatively affects the current account in the long term. The Foreign Direct Investment (FDI) variable negatively affects the current account in the long term. Furthermore, the exchange rate variable negatively affects the current account in the long term.

Do Remittances Attract Foreign Direct Investment? An Empirical Investigation

2014 ◽  
Vol 14 (1) ◽  
pp. 1-9 ◽  
Author(s):  
Hem C. Basnet ◽  
Kamal P. Upadhyaya
Keyword(s):  
Foreign Direct Investment ◽  
Latin American ◽  
Direct Investment ◽  
Asia Pacific ◽  
African Countries ◽  
Middle Income ◽  
Middle Income Countries ◽  
Negative Effect ◽  
Using Data ◽  
Latin American Countries

Remittances are a major source of household income in many Asian, African, and Latin American countries. Households spend a significant portion of remittances on health and education. Given that human capital is one of the primary determinants of foreign direct investment (FDI) inflow, this study develops a model in which remittances are one of several determinants of the observed variation in FDI. The model is estimated using data from a group of 35 middle-income countries from Latin America, Asia–Pacific, and Africa. The estimated results ascribe no significance to remittances in explaining cross-country variation in FDI. However, geographically-disaggregated estimated results do establish a positive effect for African countries, no significant effect for Latin American countries, and a negative effect for the Asia–Pacific region.

scholarly journals Asymmetric effect of real exchange rate risk on foreign direct investment: Empirical evidence in ASEAN-4

2020 ◽  
Vol 2 (3) ◽  
pp. 91-105 ◽  
Author(s):  
Jaratin Lily ◽  
Mori Kogid ◽  
Dullah Mulok ◽  
Rozilee Asid
Keyword(s):  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Direct Investment ◽  
The Philippines ◽  
Exchange Rate Risk ◽  
Asymmetric Effect ◽  
Fdi Inflows ◽  
Rate Risk ◽  
Long Run

This study investigates the asymmetric effect of exchange rate risk (volatility) on the real foreign direct investment (FDI) inflows in Malaysia, the Philippines, Singapore, and Thailand (ASEAN-4) using the Nonlinear Autoregressive Distributed Lag (NARDL) model. The results revealed the occurrence of a long-run asymmetric cointegration between real FDI inflows and real exchange rate risk in the Philippines, Singapore, and Thailand, but not in Malaysia. For the Philippines and Singapore, there is evidence of long-run asymmetry whereas short-run asymmetry exists for the case of Thailand. These findings imply that the asymmetric effects prove to be useful in providing essential information to the related parties on how FDI inflows react to exchange rate risks differently. Therefore, policymakers in ASEAN countries should be concerned about the asymmetric effect of the exchange rate volatility to mitigate the stylized effects of exchange rate movements on FDI inflows.

scholarly journals Foreign Direct Investment and Extractive Institutions

2019 ◽  
Vol 10 ◽  
pp. 36-49
Author(s):  
Jack Bowness
Keyword(s):  
Foreign Direct Investment ◽  
Latin America ◽  
Direct Investment ◽  
Manufacturing Sector ◽  
Poor Quality ◽  
Middle Income ◽  
Middle Income Countries ◽  
The People ◽  
Resource Sector ◽  
The Impact

There is a significant debate underway regarding the risks and rewards of foreign direct investment (FDI) for countries in the Global South. These discussions are particularly relevant to the people of Latin America, where the use of inward FDI as a mechanism to support economic development has had dramatic results, both positive and negative. One of the key works in the study of FDI is Robert I. Rotberg’s argument that FDI is critical to support the development of weak states; however, the applicability of this theory faces difficulty in the context of Latin America, where middle-income countries have extractive institutions (Rotberg, 2002). I use the cases of Mexico and Peru to demonstrate that for middle-income countries, extractive institutions can hamper the rewards of FDI and even exacerbate development problems or create new ones. In this regard, the sector of FDI will determine the nature of the impact. In states with extractive institutions, FDI in the natural resource sector is prone to stimulating social conflict. In states with extractive institutions, FDI in the manufacturing sector begets a situation of stagnated development, as the jobs that are introduced are of poor quality and low wages.

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