GOVERNANCE AND FOREIGN DIRECT INVESTMENT : EVIDENCE IN ASEAN
Keywords:
FDI, PMG, RQ, ROL
Abstract
This research analyzes the connection of Regulatory Quality (RQ) and Rule of Law (ROL) on Foreign Direct Investment (FDI) in ASEAN countries between 2002 to 2022. Utilizing the pooled mean group (PMG) technique with data sourced from the World Bank, the study found that Regulatory Quality significantly impacts FDI in the long term. Short-term results indicate significant corrections to the divergence of the long-term equilibrium production levels. Causality tests reveal a two-way relationship between FDI and Regulatory Quality in ASEAN countries, but no reciprocal relationship with Rule of Law was identified.
References
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Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled Mean Group Estimation of Dynamic Heterogeneous Panels. Journal of the American Statistical Association, 94(446), 621–634. https://doi.org/10.1080/01621459.1999.10474156
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Subasat, T., & Bellos, S. (2013). Governance and foreign direct investment in Latin America: A panel gravity model approach. Latin American Journal of Economics, 50(1), 107–131. https://doi.org/10.7764/LAJE.50.1.107
World Bank. (2016). Financial Development. Retrieved from https://www.worldbank.org/en/publication/gfdr/gfdr-2016/background/financial
Zangina, S., & Hassan, S. (2020). The Impact of Rule of Law on Fdi Inflow: a Pooled Mean Group Analysis of Selected Ssa Countries. Humanities & Social Sciences Reviews, 8(2), 441–450. https://doi.org/10.18510/hssr.2020.8250
Zhang, X., & Liu, W. (2022). The Rule of Law and Foreign Direct Investment. Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021), 203(Icemci), 118–122. https://doi.org/10.2991/assehr.k.211209.019
Zulkarnaen, W., Fitriani, I., & Yuningsih, N. (2020). Pengembangan Supply Chain Management Dalam Pengelolaan Distribusi Logistik Pemilu Yang Lebih Tepat Jenis, Tepat Jumlah Dan Tepat Waktu Berbasis Human Resources Competency Development Di KPU Jawa Barat. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 4(2), 222-243. https://doi.org/10.31955/mea.vol4.iss2.pp222-243.
ASEAN, & UNCTAD. (2021). ASEAN Investment Report 2020-2021 Investing in Industry 4.0. In ASEAN Secretariat. Retrieved from http://investasean.asean.org/files/upload/ASEAN%0AInvestment%0AReport%0A2020-2021.pdf
ASEAN, & United Nations. (2015). ASEAN Investment Report 2015. Retrieved from https://unctad.org/system/files/official-document/unctad_asean_air2015d1.pdf
Asteriou, D., & Monastiriotis, V. (2004). What Do Unions Do at the Large Scale? Macro-Economic Evidence from a Panel of OECD Countries. Journal of Applied Economics, 7(1), 27–46. https://doi.org/10.1080/15140326.2004.12040602
Baumann, R. (1998). Eclac Econom Ic Commission For Latin America And The Caribbean Brasilia Office Foreign Investment In Brazil And The International Financial Markets Foreign Investment In Brazil And The International Financial Markets.
Beyza Satoglu, E. (2017). “Emerging” through Foreign Investment: Investment Development Path Estimation of “MINT” Economies. Advances in Economics and Business, 5(5), 256–264. https://doi.org/10.13189/aeb.2017.050503
Breitung, J. (2000). “The Local Power Of Some Unit Root Test For Panel Data” In Nonstationary Panels, Panel Cointegration, and Dynamic Panels. In Advances in Econometrics (Vol. 15).
Chen, J. (2020). Eclectic Paradigm: Definition, Example, Advantages. Investopedia. Retrieved from https://www.investopedia.com/terms/e/eclecticparadigm.asp
Dumitrescu, E. I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4), 1450–1460. https://doi.org/10.1016/j.econmod.2012.02.014
Fofana, M. F. (2014). The influence of measures of economic freedom on FDI: A comparison of Western Europe and Sub-Saharan Africa. Global Economy Journal, 14(3–4), 399–424. https://doi.org/10.1515/gej-2014-0023
Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1), 53–74. https://doi.org/10.1016/S0304-4076(03)00092-7
IMF. (2001). How Beneficial Is Foreign Direct Investment for Developing Countries? Retrieved from https://www.imf.org/external/pubs/ft/fandd/2001/06/loungani.htm
Kaushal, L. A. (2021). Impact of institutional and regulatory quality on FDI inflow: case of a developing Indian economy. Cogent Economics and Finance, 9(1). https://doi.org/10.1080/23322039.2021.1985201
Levin, A., Lin, C. F., & Chu, C. S. J. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108(1), 1–24. https://doi.org/10.1016/S0304-4076(01)00098-7
Maddala, G. S., & Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics, 61(SUPPL.), 631–652. https://doi.org/10.1111/1468-0084.0610s1631
Mengistu, A. A., & Adhikary, B. K. (2011). Does good governance matter for FDI inflows? evidence from Asian economies. Asia Pacific Business Review, 17(3), 281–299. https://doi.org/10.1080/13602381003755765
Nik Mahmod, N. A. K. (2013). Good Governance and the Rule of Law. UUM Journal of Legal Studies, 4. https://doi.org/10.32890/uumjls.4.2013.4559
OECD. (2020). COVID-19 crisis response in ASEAN Member States. Retrieved from https://www.oecd.org/coronavirus/policy-responses/covid-19-crisis-response-in-asean-member-states-02f828a2/
OECD. (2023). Regions in globalisation. Retrieved from oecd.org/fr/regional/globalisation.htm
Pedroni, P. (1999). Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple of Economics and Statistics, Vol. No. 0, pp. . Oxford Bulletin of Economics and Statistics, 61(Special), 653–670.
Pedroni, P. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory, 20(3), 597–625. https://doi.org/10.1017/S0266466604203073
Pesaran, M. H. A. (2005). Panel Unit Root Test in the Presence of Cross Section Dependence. Journal of Applied Econometrics, 22(September 2003), 265–312.
Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled Mean Group Estimation of Dynamic Heterogeneous Panels. Journal of the American Statistical Association, 94(446), 621–634. https://doi.org/10.1080/01621459.1999.10474156
Riker, D. (2022). Regulatory Quality and Trade Performance: An Econometric Analysis. (October).
Sabir, S., Rafique, A., & Abbas, K. (2019). Institutions and FDI: evidence from developed and developing countries. Financial Innovation, 5(1). https://doi.org/10.1186/s40854-019-0123-7
Sitthivanh, P., & Srithilat, K. (2022). The Impact of Foreign Direct Investment on Environmental Quality in ASEAN Countries. Journal of Resources, Energy and Development, 18(1–2), 27–40. https://doi.org/10.3233/red-181202
Subasat, T., & Bellos, S. (2013). Governance and foreign direct investment in Latin America: A panel gravity model approach. Latin American Journal of Economics, 50(1), 107–131. https://doi.org/10.7764/LAJE.50.1.107
World Bank. (2016). Financial Development. Retrieved from https://www.worldbank.org/en/publication/gfdr/gfdr-2016/background/financial
Zangina, S., & Hassan, S. (2020). The Impact of Rule of Law on Fdi Inflow: a Pooled Mean Group Analysis of Selected Ssa Countries. Humanities & Social Sciences Reviews, 8(2), 441–450. https://doi.org/10.18510/hssr.2020.8250
Zhang, X., & Liu, W. (2022). The Rule of Law and Foreign Direct Investment. Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021), 203(Icemci), 118–122. https://doi.org/10.2991/assehr.k.211209.019
Zulkarnaen, W., Fitriani, I., & Yuningsih, N. (2020). Pengembangan Supply Chain Management Dalam Pengelolaan Distribusi Logistik Pemilu Yang Lebih Tepat Jenis, Tepat Jumlah Dan Tepat Waktu Berbasis Human Resources Competency Development Di KPU Jawa Barat. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 4(2), 222-243. https://doi.org/10.31955/mea.vol4.iss2.pp222-243.
Published
2024-11-25
How to Cite
Sakinah, R., & Firmansyah, F. (2024). GOVERNANCE AND FOREIGN DIRECT INVESTMENT : EVIDENCE IN ASEAN. Jurnal Ilmiah Manajemen, Ekonomi, & Akuntansi (MEA), 8(3), 2059-2074. https://doi.org/10.31955/mea.v8i3.4724
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