Assessing Macroeconomic Stability in Shaping Foreign Direct Investment: Evidence from Inflation and Regional GDP in North Sumatra

This study examines the impact of macroeconomic stability specifically inflation and regional economic growth (GRDP) on Foreign Direct Investment (FDI) inflows in North Sumatra, Indonesia, from 1996 to 2024.Using multiple linear regression analysis with EViews 10, the research assesses how these macroeconomic indicators influence regional investment performance.The findings indicate that inflation has a negative but statistically insignificant effect on FDI inflows, suggesting that moderate inflation does not significantly deter foreign investors.Conversely, GRDP demonstrates a negative and significant relationship with FDI, implying that increased regional economic growth may be linked to structural inefficiencies, rising production costs, and heightened competition, which can diminish investment attractiveness.These results underscore the intricate relationship between regional economic expansion and foreign investment behavior in developing areas.To enhance the effectiveness of economic growth in attracting sustainable FDI, policymakers should prioritize structural and institutional improvements, such as upgrading infrastructure, ensuring regulatory transparency, and facilitating investment processes.This study provides important contributions to the empirical literature on the determinants of FDI at the subnational level and delivers practical implications for strengthening regional investment competitiveness in Indonesia.