The Negative Effects Of Foreign Direct Investment

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According from the macroeconomics books, theories and policies the Tenth edition by Richard T.Froyen (2012) explained that inflation is a rise in the general level of prices. Based from the Investopedia, inflation is the rate at which general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Inflation is a rise in consumer prices, increasing the cost of living. Some inflation is caused because a country has printed too much money or experienced tremendous financial disaster, causing its currency to plummet. Other sources of inflation can be higher input or transportation costs such as gas, which makes it more expensive to ship good to the store. When the pressures get too great, retailers often…show more content…
al (2013), he investigated that foreign direct investment (FDI) has direct relationship with inflation rate in that for every increase in inflation rate, foreign direct investment (FDI) will increased. Kiat (2007) had found that inflation has a negative impact on foreign direct investment (FDI). The relationship is more significant in developed economies than those in the lesser developed economies, but this can be attributed to more volatile economic environment. According to Financial Times, foreign direct investment (FDI) is a component of a country's national financial accounts. It is an investment of foreign assets into a domestic structures, equipment, and organizations. It does not include foreign investment into the stock markets. According to the Malaysian Economics, foreign direct investment (FDI) also can be defined as a company from one country making a physical investment into building a factory in another country. It is the establishment of an enterprise by a foreigner. According to Findlay (1978), foreign direct investment (FDI) can boost a country’s economic growth and development. Foreign direct investment (FDI) increases technical progress in the host country in the form of offering advanced technologies, styles of management practices and marketing, accounting approaches and other areas related to corporate development of local…show more content…
The foreign direct investment (FDI) liberalization policy was also said to have contributed to the creation of an ‘economic miracle’ in Malaysia (Okamoto, 1994). The continual price stability, macroeconomic balances, good governance and economic liberalization reforms are crucial towards sustaining the foreign direct investment (FDI) (Mithani, Ahmad and Saifudin, 2008). The popular method to analyse the importance of countries attractive location factors of foreign direct investment (FDI) is the Gravity Model method. This basic model propose that trade between two countries is a function of the size of their economies as measured by the national income and population and the geographical distance between the two countries (Breuss and Egger, 1997). According to Mohamed Aslam Gulam Hassan and Sameer Abou Sakar (2013), the introduction of the Promotion of Investment Act 1986 led to a big surge of FDI particularly from 1987 to the early 1990s. During the period of 1960 to 1995, Malaysia was one of the most welcoming hosts to foreign direct investment (FDI) among developing
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