The study of interest rate, inflation rate and export as factors affecting IFDI of Malaysia / Ros’ Aida Ramli

This study is conducted to explore a possible link between some macroeconomic variables that are interest rate, inflation rate and export with inward foreign direct investment (IFDI) of Malaysia. IFDI plays crucial role to Malaysia’s development and has fueled the engine of growth of Malaysia’s economy since the early 1970s. This encouraged the researcher to embark this project to get more obvious evidences on the effects of macroeconomic variables on IFDI to Malaysia. Like other form of investments, IFDI is also affected by uncertainty and causes higher risk to investors. No doubt that Malaysia is one the of attractive destinations to invest but, the increase in terms of competition between countries to increase capital inflow rise the possibility that Malaysia will lose foreign investors to neighboring countries if we do not try to be more attractive. This study observed 84 numbers of quarterly data from 1985 to 2005 which is supported with some previous researches conducted by other researchers that are parallel with this topic. The researcher used multiple regressions package to test the data. At the end of this study, the researcher found that from individual signification of test (t-test) indicated only interest rate is not significant with IFDI while inflation and export have significant relationships. From overall significant test, independent variables have positive relationship with IFDI of Malaysia but the researcher also found a weak correlation between independent variables and dependent variable according to R-square value. Finally, the researcher hopes these findings may assist policy-makers in their efforts to attract more IFDI into Malaysia.