The Causal Nexus Between Foreign Direct Investment and Economic Growth in Indonesia: An Autoregressive Distributed Lag Bounds Testing Approach

Tanaya, Olivia and Suyanto, Suyanto (2022) The Causal Nexus Between Foreign Direct Investment and Economic Growth in Indonesia: An Autoregressive Distributed Lag Bounds Testing Approach. Periodica Polytechnica Social and Management Sciences, 30 (1). pp. 57-69. ISSN 1587-3803 (online); 1416-3837 (Print)

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Abstract

The nexus between foreign direct investment and economic growth has long been among the most debated issues in macroeconomics. Some studies find a positive link between the two factors, but others find no evidence. This current research fills the gap by analysing the causal nexus between foreign direct investment and economic growth in Indonesia for the period 1970-2018. Indonesia as a developing country is one of the largest recipients of FDI flow; hence the study on the impact of FDI on the economic growth is very much important. This current research employs a contemporary time-series procedure, involving several unit-root tests namely Augmented-Dickey-Fuller (ADF), Phillips-Perron (PP), Kwiatkowski-Phillips-Schmidt-Shin (KPSS), and Lee-Strazicich (LS), an Auto-Regressive-Distributed-Lag (ARDL) bounds-testing method for cointegration, and Granger causality test. The findings provide evidence of long-run and short-run causal direction from GDP to FDI. In contrast, FDI generates only a short-run relationship on GDP. The Granger causality test confirms the finding in ARDL that there is a unidirectional causality running from GDP to FDI.

Item Type:	Article
Uncontrolled Keywords:	foreign direct investment, economic growth, causal relationship, Indonesia
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HB Economic Theory H Social Sciences > HG Finance
Divisions:	Faculty of Business and Economic > Department of Economic
Depositing User:	OLIVIA TANAYA
Date Deposited:	05 Jan 2022 06:52
Last Modified:	20 Jun 2022 03:39
URI:	http://repository.ubaya.ac.id/id/eprint/40905

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