The Influence of Inflation, Exchange Rate, Interest Rate, and Composite Stock Price Index (CSPI) on Foreign Portfolio Investment in Indonesia

Aldiat Noverza, Muhammad Faisal Akbar () and Ayu Wulandari
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Aldiat Noverza: Universitas Bangka Belitung, Faculty of Economics and Business
Muhammad Faisal Akbar: Universitas Bangka Belitung, Faculty of Economics and Business
Ayu Wulandari: Universitas Bangka Belitung, Faculty of Economics and Business

A chapter in Proceedings of the 1st International Conference of Economics, Management, Accounting, and Business Digital (ICEMAB 2024), 2024, pp 184-192 from Springer

Abstract: Abstract This study aims to examine the impact of Inflation, Exchange Rate, Interest Rate, and the Composite Stock Price Index (CSPI) on Foreign Portfolio Investment (FPI) in Indonesia from 2014 to 2023. Given Indonesia's growing integration into global financial markets, understanding the drivers of FPI is critical for policymakers seeking to attract stable and long-term foreign investment. Using a quantitative approach and secondary data, the analysis is conducted through multiple linear regression to assess the relationship between these key macroeconomic variables and FPI. The results indicate that Inflation has a negative but statistically insignificant effect on FPI, suggesting limited influence on investor decisions. The Exchange Rate, however, exerts a significant negative impact, highlighting its role in foreign investors sensitivity to currency fluctuations. The Interest Rate shows a significant positive effect, underscoring its importance in attracting foreign capital. Meanwhile, the CSPI has a negative yet statistically insignificant influence on FPI. Importantly, when analyzed together, Inflation, Exchange Rate, Interest Rate, and CSPI collectively have a positive and significant impact on Foreign Portfolio Investment in Indonesia. These findings offer valuable insights for policymakers aiming to manage macroeconomic stability and foster a conducive environment for Foreign Portfolio Investments.

Keywords: Inflation; Exchange Rate; Interest Rate; Composite Stock Price Index; and Foreign Portfolio Investment (search for similar items in EconPapers)
Date: 2024
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DOI: 10.2991/978-94-6463-614-7_24

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