Impact of Corruption on FDI Inflows in Indonesia

Kartikasari, Cynthia Yohanna and Suyanto, Suyanto (2022) Impact of Corruption on FDI Inflows in Indonesia. Media Trend, 17 (2). pp. 587-599. ISSN 1858-1307; E-ISSN 2460-7649

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Abstract

The inflows of Foreign Direct Investment (FDI) to a country depend on many factors of the crucial factors is the corruption index, which represents a pivotal aspect in Global Investment Competitiveness (GIC). This research analyzes the impact of the corruption perception index on FDI inflows to Indonesia. Other variables affecting FDI are Gross Domestic Product (GDP), inflation rate, and population. Vector Error Correction Model (VECM) is used to estimate the time series sample between 1995 and 2019. Following the time series procedure, several tests are conducted on the dataset before applying VECM: unit-root, optimum lag, and cointegration. The main finding shows that the higher the corruption index, the higher the FDI Inflows, implicating that low corruption attracts more FDI inflows to Indonesia. Other findings are that an increase in GDP attracts more FDI, an increase in inflation rate reduces FDI inflows, and an increase in population increases FDI inflows. The policy implication of the findings is related to an effort in attracting more FDI inflows requires a substantial endeavor in combating corruption and increasing the Corruption Perception Index of Indonesia from time to time.

Item Type:	Article
Uncontrolled Keywords:	Corruption perception index, foreign direct investment, Inflation rate.
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HN Social history and conditions. Social problems. Social reform
Divisions:	Faculty of Business and Economic > Department of Economic
Depositing User:	CYNTHIA YOHANNA KARTIKASARI
Date Deposited:	04 Sep 2023 02:25
Last Modified:	08 Aug 2024 02:16
URI:	http://repository.ubaya.ac.id/id/eprint/44884

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