Effect of fdi on the economy of host country: Case study of asean and Thailand

Abstract

© Springer Nature Switzerland AG 2019. The aim of this study is to investigate the effect of foreign direct investment (FDI) on the economy of host country by using the sample of ASEAN–FDI inflows to Thailand and Thailand’s economic indicators during the year 2005–2017. In order to complete the better implication of FDI effect on the economy, this study incorporates other economic variables, namely stock market, exportation, GDP growth, consumer price index, importation and production of manufacturing index. Time series analysis and Bayesian method are employed in this study as they are useful estimators for making a prediction in various applied economic and econometric models. The basic background of Bayesian method refers to the Bayes theorem for computing the posterior distribution of interested parameters. Additionally, the posterior can be calculated by the prior distribution and the likelihood function through the joint distribution. This approach is based on multiple linear regression context which confirms the significant effect of FDI on the Thai economy. Nevertheless, there are FDI inflows from some countries in ASEAN which do not have any significant effect on Thai economy.