Factors affecting foreign direct investment decision in Malaysia / Mohammad Hafizi Mustafa

This study examines the relationships that between foreign direct investment (FDI) and the determinants economic growth (GDP), exchange rate (EXC), inflation rate (INF) and trade openness (TRD) from the year of 1985 to 2015 which contains yearly data. This paper applies Ordinary Least Square methods in order to define the statistical relationship among the variables. Besides, there are steps involved in the study begin with ordinary least square methods and proceed with Descriptive Analysis, Diagnostic Checking, Unit Root tests, Multiple Linear Regressions. In Diagnostic Checking, some tests done to check the significant presents of multicollinearity, autocorrelation, heteroscedasticity, the normality of data distribution and model specification. The result of this study show that there is a significant relationship between the Foreign direct investment (FDI) and the economic growth (GDP), exchange rate (EXC) and inflation rate (INF), while trade openness did not have any relationship with the FDI. The recommendation for the future studies is future studies should use other factors instead of macroeconomics factor in order to examine the factors that affecting the foreign direct investment decision in Malaysia. The conclusion for the studies shows that the GDP, INF and EXC become the factors that affecting the FDI decision in Malaysia.