Exchange rate volatility and manufacturing foreign direct investment in Southeast Asia

This study investigated exchange rate volatility effects on manufacturing Foreign Direct Investment in Thailand, Vietnam, and Indonesia during 2010–2024. Using panel data analysis, threshold regression, and Vector Error Correction modelling, the research identified a critical 3.47% monthly volatility threshold above which negative effects intensify substantially. Results showed coefficients of −847.32 in linear models and −1156.89 above the threshold, with confirmed long-run equilibrium relationships and unidirectional causality from volatility to investment flows. The precise threshold identification represents a significant methodological advancement, providing policymakers with specific volatility targets for optimizing manufacturing FDI attraction in Southeast Asian economies.