THE RELATIONSHIP BETWEEN FOREIGN PORTFOLIO INVESTMENT AND FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH (STUDY AT INDONESIA STOCK EXCHANGE AND BANK OF INDONESIA PERIOD 2006-2014)
ABSTRACT: The financial
liberalization imposed by Indonesia triggers the rapid inflow from
international financial resources. There are two major foreign investments
namely foreign portfolio investment (FPI) and foreign direct investment (FDI).
FPI is a passive investment with a high volatility which is used by foreign
investor to diversify risk. Whist, FDI is a category of cross-border investment
in which an investor resident in one country establishes a significant degree
of influence over an enterprise resident in another country.Both forms of
foreign capital can be an engine for the economic growth, in which economic
growth is the increase of capacity to produce goods and services in a country.
This research objectives are to figure out the effect of foreign portfolio
investment (FPI) on economic growth, the effect of FPI on foreign direct
investment (FDI) and the effect of FDI on economic growth in Indonesia. Using
data from Indonesia Stock Exhange and Bank of Indonesia, this study applies
quarterly time series data of FPI, FDI and economic growth period 2006-2014 as
much as 36 unit of analysis. Applying path analysis as the research method the
results of this research are FPI has a significant effect on economic growth,
FPI has a significant effect on FDI and FDI has a significant effect on
economic growth. These results also indicates that through FDI the relationship
of FPI on economic growth is able to be strengthen.
Keywords: foreign portfolio
investment, foreign direct investment, economic growth
Author: Amanda Ade Winona, Suhadak,
Nila Firdausi Nuzula
Journal Code: jpadministrasinegaradd160928
