Interest Rates, Fuel Subsidies, and Investment Friendliness in Southeast Asia
6 Pages Posted: 18 Oct 2018
Date Written: August 22, 2018
Abstract
The question of investment determinants has been widely debated in the economic field, with scholars such as Daude and Stein (2007) and Waheed (2015) citing institutional quality as key while Ibrahim (2011), Jongwanich and Kohpaiboon (2008) cite financial market conditions as key. However, the role of fuel subsidies in affecting investment friendliness in smaller-scale oil producing countries have not been sufficiently addressed. My paper investigates determinants of investment friendliness in Southeast Asia with special attention to fuel subsidies. Specifically, in my project, I examined the interactions between lending interest rates, fuel subsidies, and gross fixed capital formation to carry out qualitative case studies on oil producing countries. I theorize that countries with higher fuel subsidies are likely to be less investment friendly than countries with lower fuel subsidies. This project, by closely examining fuel subsidies, sheds new light on the rarely acknowledged issue of fuel subsidies and investment friendliness.
Keywords: Fuel Subsidies, Gross Fixed Capital Formation, Interest Rates, Investment Friendliness, Southeast Asia
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