5
Table 2
Long-run results
Variable
LJFDI (1.2)
LUSFDI (1.3)
LEUFDI (1.4)
Intercept
t
LGDP
t
LTWR
t
LTUC
t
LRER
-2.12*
0.65***
-1.70***
-0.02
4.45***
1.76*
1.48***
-0.47*
-0.05**
0.39
-1.47*
0.64***
-1.23***
-0.02**
0.37**
CRADF
(lag)
CRDW
2
R
F
-value
δ
2
χ
RESET
Nob
-6.50**(2)
1.57
0.80
29.99
0.14
1.06
25
-5.58**(1)
1.92
0.77
18.03
0.15
0.05
25
-5.27***(1)
1.76
0.85
30.63
0.15
1.83
25
Note ***, **, * represent statistical significance at the 1%, 5% and 10% levels, respectively.
All estimated coefficients’ signs are as expected. The estimated results indicate that FDI
from developed countries is stimulated by the large market size and the currency depreciation in
Thailand. On the other hand, the increments of the costs of production,
LTWR
and
LTUC
, act as a
deterrent for FDI. It is also observed that the impact of each explanatory variable on FDI from
different sources is not of the same level.
In common with previous studies, there is support for a positive relationship between
domestic demand
(LGDP)
and FDI inflows in this study. Regarding the estimated coefficients on
LGDP
, the largest coefficient’s value is obtained from Equation (1.3), meaning that
USFDI
is closely
cointegrated with the domestic market. This significance may lead us to infer that FDI from the US
is more market-oriented than the others. This evidence is consistent with the finding of Suh and
Tarumun (1999) in the case of US FDI in Indonesia.
The negative coefficient on
LTWR
in all estimated regressions is an obvious indication that
the low wage rate in Thailand is the key inducement of FDI inflows, especially for those from Japan.
This reflects the fact that most FDI inflows from Japan have concentrated in the manufacturing
sector, which the labor cost is the primary determinant. For US investors, this variable is
comparatively less important. This is partly due to the fact that the US investors tend to concentrate
in capital-intensive production, e.g. chemicals, trade and finance, rather than in the labor-incentive
one.
Though this study found a negative relationship between FDI and the user cost of capital
for the US and the EU, its impact on FDI is rather small compared to the real wage rates.
At least
