Determinants of Foreign Direct Investment (Fdi) in Indonesia: Short Term and Long Term

Abstract

Abstract. Introduction. Foreign capital flows have an important role in a sustainable Indonesian economy, these flows have a significant influence on developing countries, especially Indonesia to encourage increased economic growth. This study focuses on analyzing the determination of macroeconomic variables including economic growth, interest rates, rupiah exchange rates, and the number of residents who subscribe to cellular phones. Purpose. This study focuses on long-term analysis of macroeconomic variables in determining foreign direct investment (FDI). Results. The findings of this study indicate that in the short term economic growth has a positive and significant effect on foreign direct investment. while the rupiah exchange rate, interest rate,s and the number of residents who subscribe to cellular phones have a negative and significant effect on foreign direct investment. while in the long term economic growth has a positive but not significant effect on foreign direct investment. while the interest rate and the number of residents who subscribe to cellular phones have a positive and significant effect. Meanwhile, the rupiah exchange rate in the long term has a negative and significant effect. Conclusions. Based on the short-term estimation, Economic Growth has a positive and significant effect on Foreign Direct Investment. Meanwhile, the Rupiah Exchange Rate, Interest Rate, and Number of Residents Subscribing to Cellular Phones have a negative and significant effect on Foreign Direct Investment and Based on the long-term estimation, Economic Growth has a positive but not significant effect on Foreign Direct Investment. Meanwhile, the interest rate and the number of residents who subscribe to cell phones have a positive and significant effect. Meanwhile, the Rupiah Exchange Rate in the long term has a negative and significant effect.