THE ROLE OF FINANCIAL DEVELOPMENT IN ENHANCING DOMESTIC INVESTMENT IN ASIA

Heni Angelica, NIM.: 22108010063 (2025) THE ROLE OF FINANCIAL DEVELOPMENT IN ENHANCING DOMESTIC INVESTMENT IN ASIA. Skripsi thesis, UIN SUNAN KALIJAGA YOGYAKARTA.

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Abstract

This study analyzes the impact of financial sector development, trade openness, inflation, interest rates, and the COVID-19 pandemic on domestic investment in Asia during the period 2011–2023. The researchers used panel data from 12 Asian countries with domestic investment as the dependent variable, proxied by Gross Fixed Capital Formation, and panel data regression using the Fixed Effect Model approach corrected using Generalized Least Squares. The results of the analysis show that financial sector development, trade openness, and inflation have a positive and significant effect on domestic investment, while interest rates and the COVID-19 dummy variable have a negative and significant effect. Overall, these variables explain most of the variation in domestic investment in Asia and confirm the importance of strengthening the financial sector, targeted trade openness, inflation management, and interest rate policies that support the investment climate in order to achieve sustainable economic development. Keywords: financial development, trade openness, inflation, interest rates, COVID-19, domestic investment

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