ASEAN Investor Confidence: Macroeconomic Stability and Governance: Empirical Evidence from Panel Regression
Abstract
Investor confidence is a key determinant affecting foreign investment inflows. This study aims to examine the role of macroeconomic stability and governance variables namely inflation, exchange rate, government effectiveness, regulatory quality, and control of corruption in affecting FDI in the ASEAN 6 region (Indonesia, Malaysia, Cambodia, Thailand, the Philippines, and Vietnam). The data used in this research were panel data from 2010 to 2022 sourced from the World Bank. The model used was panel data regression with the selection of the best model, namely the Fixed Effect Model (FEM). The panel data analysis results indicate that inflation has a non-significant effect on FDI, while the exchange rate, government effectiveness, regulatory quality, and control of corruption significantly affect FDI with significant probability values. The findings of this study provide policy recommendations for developing countries to enhance investor confidence (psychological conditions), strengthen macroeconomic stability, and improve governance to attract more FDI.
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DOI: https://doi.org/10.30596/miceb.v2i0.541
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