The determinants of foreign direct investment inflow in South Korea

Koo, Won Kyu (2020) The determinants of foreign direct investment inflow in South Korea. Bachelor thesis, Universitas Pelita Harapan.

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Abstract

Over the years, South Korea has been experiencing rapid economic development by opening itself more for foreign investment through various trade liberalizations and tax policies that benefited foreign investments. However, for the past few years, direct investment from abroad has been declining, mainly due to the end of the tax break in 2018. This research was done in order to explore important determinants of foreign direct investment (FDI) besides tax that would bring more investments into the country. Four determinants are proposed based on various existing researches: (1) trade openness, (2) labor cost, (3) exchange rate, and (4) macroeconomic uncertainty. Using AutoRegressive Distributed Lag (ARDL) with cointegration on publicly available data from the year 1975 to 2017, both short-run and long-run effects were estimated. The author found that trade openness might not necessarily result in increased FDI inflows in the long-run. In the short-run, trade openness is an important determinant for FDI inflows, however, this effect is corrected within two years, giving the advantages from increasing openness short-term in nature. It is also found that there is a positive relationship between labor cost and FDI inflows in the long run, however, the relationship is nonexistent in the short run. The exchange rate was found to have a lasting effect in the long-run, while not having any effect in the short-run. And finally, the researcher found no reason to support that macroeconomic uncertainty, as defined by the world uncertainty index (WUI) affects FDI inflows in Korea.

Item Type: Thesis (Bachelor)
Creators:
CreatorsNIMEmail
Koo, Won KyuNIM00000009417s00000009417@student.uph.edu
Contributors:
ContributionContributorsNIDN/NIDKEmail
Thesis advisorTan, Pauline H. PattyranieNIDN0023036906pauline.henriette@uph.edu
Uncontrolled Keywords: fdi; trade openness; labor cost; exchange rate; macroeconomic uncertainty
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions: University Subject > Current > Faculty/School - UPH Karawaci > Business School > Management
Current > Faculty/School - UPH Karawaci > Business School > Management
Depositing User: Users 11390 not found.
Date Deposited: 05 Jul 2021 03:18
Last Modified: 05 Jul 2021 03:18
URI: http://repository.uph.edu/id/eprint/40274

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