Impact of Exchange Rate, Foreign Direct and Portofolio Investment on ASEAN 4 Economic Recovery after Crisis : Global Imbalance Phenomenon

Abstract

ASEAN is a geopolitical organization in the Southeast Asian region that aims to increase economic growth, social and cultural development, promote peace and stability in political conditions at the regional level. With their potential and resources, ASEAN countries are included in the top 20 investment host countries. During the 1998 monetary crisis, ASEAN countries including Indonesia, Malaysia, Thailand, and the Philippines (ASEAN 4) received a significant impact. Drastic corrections in currency exchange rates, significantly affected socio-political conditions, led to a decline in the amount of foreign direct investment and portfolio investment that flows into these countries. Various government and central bank policies in maintaining the ease of investment for investor countries have made the ASEAN 4 economy recover quickly as widely known of Miracle of Asia. After the Global Imbalance due to the subprime mortgage in the United States in 2008, ASEAN 4 countries were affected but not as significant as the economic crisis in 1998. The purpose of this study was to examine the effect of exchange rates, foreign direct investment, and portfolio investment in ASEAN 4 countries after the crisis in the global imbalance phenomenon. The variables used in this research are economic growth, exchange rate, FDI and Portfolio Investment. The method used is fixed effect regression model. The results obtained are the high value of FDI capital inflows to ASEAN 4 countries and a maintained exchange rate that can restore economic recovery which is proxied by rapid economic growth even in conditions of global imbalances.