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Abstract
This study examines another significant form of international business, foreign direct investment (FDI). Unlike the theory of international trade and theory of international portfolio investment, there is no well developed comprehensive theory of foreign direct investment. In particular, this paper employs an econometric model to assess the impact of crucial factors that affected foreign direct investment in Thailand from 1973 to2000. Augmented Dickey Fuller and Phillips-Perron tests for stationarity followed by cointegration tests are implemented. The dynamic responses of foreign direct investment to changes in real income, foreign exchange rate, labor cost and inflation are investigated. The results suggest that among all of these variables only real income play an important role in determining the level of FDI in Thailand. The industrial policy that stimulates economic growth would be imperative to attract more inflow of FDI.
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Abstract
This study examines another significant form of international business, foreign direct investment (FDI). Unlike the theory of international trade and theory of international portfolio investment, there is no well developed comprehensive theory of foreign direct investment. In particular, this paper employs an econometric model to assess the impact of crucial factors that affected foreign direct investment in Thailand from 1973 to2000. Augmented Dickey Fuller and Phillips-Perron tests for stationarity followed by cointegration tests are implemented. The dynamic responses of foreign direct investment to changes in real income, foreign exchange rate, labor cost and inflation are investigated. The results suggest that among all of these variables only real income play an important role in determining the level of FDI in Thailand. The industrial policy that stimulates economic growth would be imperative to attract more inflow of FDI.