Determinants of Foreign Direct Investment in Thailand: The Role of Debts
Keywords:
FDI, Foreign Direct Investment, Debt, ThailandAbstract
This paper investigates the impact of debts, classified by borrowers and sources, on foreign direct investment (FDI) inflows, both aggregate and selected sectors, in Thailand during 1997: Q1 to 2020: Q4. Drawing upon the OLI paradigm and considering the motivations of multinational enterprises (MNEs) in conducting direct investment, the study applies the ARDL approach to examine this relationship in both the short run and the long run. The results showed that increases in total debt adversely affect total FDI inflows both in the short run and the long run. The results of public, private, household, and corporate debt are in line with the outcome of total debt. Interestingly, in the short run, increases in domestic debt helped attract FDI inflows, but in the long run, its undesirable impact became evident. External debt also negatively impacted FDI inflows, but only in the short run. When analyzing key sectors, the impacts of debt on FDI inflows vary. The negative impact of debt on FDI inflows was highest in the manufacture of electrical equipment, followed by the manufacture of computer, electronic, and optical products, while no significant impact was observed in the manufacture of motor vehicles, trailers, and semi-trailers.
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