The Impact of Government Risk, Inflation, and Exchange Rate on Foreign Investment of Indonesia
Imron Mawardi, Muhammad Ubaidillah Al Mustofa, Tika Widiastuti, Masrizal

Universitas Airlangga

Abstract

Every investment decision would require consideration on macroeconomic variables. The purpose of this study is to analyze the influences of government risk, inflation, and exchange rate on foreign direct investment, FDI, in Indonesia. Associative research method using regression analysis and data processing on EViews will assist us to reach the goal. Annual data from 1988 until 2016 of inflation, USD/IDR exchange rate and risk would be the samples for the study. Empirical results showed, jointly, independent variables affect FDI significantly. On the other hand, as partial, government risk and exchange rate influenced FDI positively with significant rates. While inflation insignificantly and negatively affect the dependent variable. Rational investor would pay attention to every macroeconomic variable while undergoing the process of return capitalization. They cannot be underestimated.

Keywords: Exchange Rate, FDI, Government Risk, Inflation, Investment Decision.

Topic: Financial Management and Accounting