Table of Contents
Economics Research International
Volume 2014, Article ID 320949, 10 pages
Research Article

Exchange Rate Movement and Foreign Direct Investment in Asean Economies

School of Business and Economics, Universiti Malaysia Sabah, Jalan UMS, 88400 Kota Kinabalu, Sabah, Malaysia

Received 29 November 2013; Revised 24 February 2014; Accepted 2 March 2014; Published 30 March 2014

Academic Editor: Junsoo Lee

Copyright © 2014 Jaratin Lily et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


The inflows of foreign direct investment (FDI) are important for a country's economic development, but the world market for FDI has become more competitive. This paper empirically analyses the exchange rate movements and foreign direct investment (FDI) relationship using annual data on ASEAN economies, that is, Malaysia, the Philippines, Thailand, and Singapore. By employing ARDL bounds test approach, the empirical results show the existence of significant long-run cointegration between exchange rate and FDI for the case of Singapore, Malaysia, and the Philippines with all countries recording negative coefficient implying that the appreciation of Singapore dollar, Malaysian ringgit, and the Philippine peso has a positive impact on FDI inflows. Using the ECM based ARDL approach for causality test, both Singapore and the Philippines show long-run bidirectional causality between exchange rate and FDI whereas long-run unidirectional causality running from the exchange rate to FDI in Malaysia. Furthermore, this study also found that short-run unidirectional causality running from the exchange rate to FDI exists in Singapore.