Impacts of Political Risk and Macroeconomics Factors Towards Foreign Direct Investment in Developing Countries

Mohamad, Nasir; Othman, Jaizah; Tarmizi, Raudhah Mohd; Hamidi, Naser

doi:10.56225/ijfeb.v2i1.47

Cited by 2 publications

(1 citation statement)

References 44 publications

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“…Several studies have examined the relationship between exchange rates and FDI, focusing on factors such as exchange rate volatility, trade openness, GDP, and other macroeconomic variables. The study done by Mohamad et al (2023) discovered that the exchange rate, exports, and political stability have a negative relationship with the level of FDI in developing countries. Kiyota and Urata (2004) found that exchange rate volatility has a positive impact on FDI.…”

Section: Exchange Rate (Exe)mentioning

confidence: 99%

Determinants Of Foreign Direct Investment In Malaysia

Zaharum,

Md Isa,

A. Latif

et al. 2024

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Foreign Direct Investment (FDI) occurs when one country invests in another. Multiple factors have contributed to fluctuations in FDI flows globally. This study investigates the impact of the microeconomic variables on FDI in Malaysia. Data were collected for the period of 30 years from 1992-2021 and analysed using Multiple Linear Regression models. The study’s findings concluded that gross domestic product (GDP), inflation (INF), real interest rate (RIR), trade openness (TRA), unemployment rate (UNE) and exchange rate (EXC) are six major macroeconomic variables impacting FDI inflows. Result of the study reveal that gross domestic product (GDP), inflation (INF) and exchange rate (EXC) are positively related to foreign direct investment (FDI). This suggests that a robust domestic economic output, moderate inflation rates, and favourable exchange rates serve to attract foreign investment. However, the study reveals that the real interest rate (RIR), trade openness (TRA) and unemployment rate (UNE) are negatively related to foreign direct investment (FDI). Overall, this study contributes valuable insights into the intricate relationship between microeconomic variables and FDI inflows in Malaysia, shedding light on how different economic factors collectively shape the investment landscape of the nation.

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Section: Exchange Rate (Exe)mentioning

confidence: 99%

Determinants Of Foreign Direct Investment In Malaysia

Zaharum,

Md Isa,

A. Latif

et al. 2024

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Impacts of macroeconomic factors during COVID-19 pandemic on property loan impairments and overhang: case study of Malaysia

Chai,

Tham,

Cheng

et al. 2024

IJHMA

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Purpose The COVID-19 pandemic has profoundly impacted the global economy, disrupting supply chains, causing job losses and altering consumer demand. In Malaysia, the real estate sector has been notably affected, with increased property impairments and overhang due to unprecedented uncertainty. Understanding these effects is crucial for policymakers and investors to prevent real estate and banking crises. This study aims to analyse the relationships between macroeconomic factors during the pandemic on property impairments and overhang, providing insights for maintaining macroeconomic stability. The findings will inform strategies for mitigating economic shocks, identifying opportunities, and guiding real estate policies in Malaysia and potentially globally. Design/methodology/approach This research article uses a time series ARDL regression analysis to examine pivotal macroeconomic factors including income, housing process, interest rates and unemployment on property loan impairments and property supply overhang in Malaysia. ARDL is effective to measure and analyse time series data, especially to understand the lagged impacts of macroeconomic factors. This can be seen by various economists in analysing macroeconomic factors affecting non-performing loans or the real estate finance using regression analyses both in Malaysia and other regions. The observations are gathered before, during and after the COVID-19 pandemic, spanning a five-year period with monthly frequency from 2018 to 2022. Findings The study emphasizes the critical importance of effectively managing unemployment and implementing policy interventions, such as moratoriums, to stabilize the economy and reduce the risk of loan impairments during crises like the COVID-19 pandemic. Additionally, this study highlights a significant inverse relationship between income per capita and loan impairments, underscoring the necessity for policies that promote economic growth and income equality. Initiatives targeting job creation, education and skills development can elevate income levels, thereby decreasing loan impairments. Lower lending interest rates during the pandemic also help mitigate the risk of loan impairments by facilitating borrowing, stimulating economic activity and enhancing financial well-being. Furthermore, the study suggests that while lower interest rates incentivize property developers and investors, understanding the intricate interaction between housing prices and supply is crucial for policymakers and stakeholders to effectively manage the housing market and ensure adequate housing supply, especially during crises. Research limitations/implications This paper provides insight for policymakers, regulators, investors and property consultants into the dynamic effects of key macroeconomic factors amidst a global recession in how they impact the real estate market with regards specifically to all types of property loan impairments and property supply overhang. The observations are limited to the COVID-19 period, spanning five years with monthly data from 2018 to 2022. This understanding can facilitate the development of targeted strategic monetary policies and investment decisions in case of future recessions. Practical implications Policymakers should prioritize initiatives such as moratoriums and job creation programs to mitigate economic downturns. Additionally, financial institutions need to adjust lending practices in response to lower interest rates, while stakeholders in the housing market must understand the complex dynamics between housing prices and supply to ensure a balanced market. Overall, addressing underlying economic factors and implementing targeted policies are essential for building resilience and promoting sustainable economic growth amidst challenging circumstances. Social implications Initiatives aimed at fostering income equality, creating employment opportunities and ensuring housing accessibility contribute to greater social cohesion and well-being. By promoting financial inclusion and building resilience to crises, societies can mitigate the adverse social impacts of economic challenges such as unemployment and housing affordability. Overall, addressing socioeconomic disparities and promoting inclusive growth are essential for fostering a more equitable and resilient society. Originality/value The originality and uniqueness of this study lie in its comprehensive analysis of the impact of COVID-19 on loan impairments and housing supply. While previous studies have focused on the pandemic’s effects on specific segments of the real estate market or property prices, this study provides a broad overview of its impact on property loan impairments and housing supply overhang. Finally, this study highlights the social and practical implications. Overall, this study offers a distinctive analysis of COVID-19’s impact on the real estate market and its implications for policymakers, real estate professionals and investors.

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Impacts of Political Risk and Macroeconomics Factors Towards Foreign Direct Investment in Developing Countries

Cited by 2 publications

References 44 publications

Determinants Of Foreign Direct Investment In Malaysia

Determinants Of Foreign Direct Investment In Malaysia

Impacts of macroeconomic factors during COVID-19 pandemic on property loan impairments and overhang: case study of Malaysia

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