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The role of macroeconomic factors and development indicators in attracting foreign direct investment: an empirical study of upper middle-income countries

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  • Muhammad Budi Utama
  • Farawi Ghannili
  • Moh. Nurul Iman

Abstract

In recent years, foreign direct investment (FDI) has emerged as a significant source of capital for many countries around the world, offering various advantages. The magnitude of FDI benefits has led to intense global competition. The objective of this study is to analyse the factors driving FDI flows in upper-middle-income countries. The generalised method of moments (GMM) estimation approach was used to test the hypotheses with panel data for the period 2013-2022. Our findings confirm a positive relationship between inflation and HDI, a negative relationship between GDP, AL, and CTR, and no relationship for the other variables. The results of this study indicate that governments should focus on policies that balance the attractiveness of FDI and the benefits received by the country, especially its citizens. This includes maintaining stable inflation rates, increasing HDI, and reconstructing tax policies with a more equitable distribution of tax rates.

Suggested Citation

  • Muhammad Budi Utama & Farawi Ghannili & Moh. Nurul Iman, 2026. "The role of macroeconomic factors and development indicators in attracting foreign direct investment: an empirical study of upper middle-income countries," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 22(1), pages 57-80.
    • Handle: RePEc:ids:ijtrgm:v:22:y:2026:i:1:p:57-80
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