Research on the effects of interest rate, inflation rate and gross domestic product (GDP) on the level of foreign direct investment (FDI) inflows (evidence from Uzbekistan)
DOI:
https://doi.org/10.5281/zenodo.15226763Keywords:
Variance Inflation Factor (VIF), Belsley-Kuh-Welsch diagnostics, A log-linear Ordinary Least Squares (OLS), Inflation, FDI, GDP, Uzbekistan, Interest rate.Abstract
This study investigates the macroeconomic determinants of foreign direct investment (FDI), focusing on the
effects of interest rates, inflation, and gross domestic product (GDP) on FDI inflows. Using a log-linear Ordinary Least
Squares (OLS) regression model and a dataset comprising 33 annual observations, we examine the relationship between
the natural logarithms of FDI, interest rates, inflation, and GDP. The results indicate that inflation has a statistically
significant and negative impact on FDI, suggesting that rising inflation discourages investment inflows. Interest rates
exhibit a positive and marginally significant effect on FDI, while GDP does not show a statistically meaningful relationship.
Variance Inflation Factor (VIF) and Belsley-Kuh-Welsch diagnostics suggest moderate multicollinearity, particularly
involving GDP, but not at a level requiring model revision. These findings highlight the sensitivity of FDI to macroeconomic
stability, especially inflation, and underscore the importance of maintaining a favorable investment climate
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