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The Effect of Foreign Direct Investment and Exchange Rate toward
Unemployment Rate
Chew Shell Yong
Supervisor: Dr. Suhal Kusairi
Bachelor of Economics (Natural Resources)
School of Social and Economic Development
This study aims to explore the effect of foreign direct investment and exchange rate
toward the unemployment and to examine their two ways relationships due to the
ambiguously results of previous research. Sample data are ASEAN-5 countries from
2001 to 2015 and utilize the static panel data analysis. The result showed that the
relationship of foreign direct investment is inversely related with the unemployment
rate which means that increased foreign direct investment will decrease the
unemployment rate. Furthermore, foreign exchange rate positively affects the
unemployment rate. Besides, Granger Causality Test showed that the two independent
variables do not run a unidirectional causality relationship with the unemployment
rate. This study also revealed that there are many challenges facing policy makers in
order to reform the business environment to make it more attractive for foreign direct
investments and to stabilize the exchange rate for lower unemployment rate.
1381 | UMT UNDERGRADUATE RESEARCH DAY 2018