Abstract
The research aimed to evaluate the association of disposable income and environmental pollution on the investments measured using FDI (Foreign Direct Investment). The research was specific to the Indonesian economy. The research was secondary quantitative and the data was accumulated from World Bank. The time frame considered for this study ranged from 1960 to 2018. For statistical analysis, descriptive statistics, stationarity testing, ARDL assessment and Granger Causality have been used. The results unveiled that both disposable income and environmental pollution are found to have significant effect on the FDI of Indonesia. Therefore, both the proposed hypotheses have been accepted. The research is limited to Indonesia and no other country has been evaluated. Therefore, in future more countries can be considered for comparative analysis. In furtherance, more factors can be considered in future that affect Indonesian FDI.
Highlights
Amongst countries in the developing world, Indonesia is one of the countries in ASEAN-5 nations having a significant share of Foreign Direct Investment (FDI) inflows over the past few years
According to the study conducted by Sapkota and Bastola (2017) the increasing development within these countries in Indonesia, there has been a drastic impact of Foreign Direct Investment (FDI) inflows on the physical environment of the countries
It has been found in the study conducted by Doytch and Uctum (2016) that FDI could lead towards various issues with respect to the environment and with respect to the income level of people living in that region
Summary
Amongst countries in the developing world, Indonesia is one of the countries in ASEAN-5 nations having a significant share of FDI inflows over the past few years. At the same time, it has been postulated by the FDI critics that the neo-liberal FDI have difference within the environmental regulations in terms of its influence through industry level location decisions increasing pollution within the environment (Baek, 2016). It has been found in the study conducted by Doytch and Uctum (2016) that FDI could lead towards various issues with respect to the environment and with respect to the income level of people living in that region. The role of FDI within the development of a country is evident in terms of its economic growth but simultaneously it creates a negative impact on the safety concerns of the environment (Shahbaz et al, 2018)
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