Application of the Least Squares Approach in Modelling Foreign Direct Investment Decisions

Abstract

Foreign direct investment shows an increase every year. A number of economists see foreign direct investment as a potential opportunity to promote a country's economic growth. The importance of comprehension for long-term investment decisions involves conducting a foreign direct investment decision analysis that utilizes mean values, median values, and standard deviations. This study was conducted to analyse foreign direct investment decisions concerning the potential long-term impact probability values. This study uses a quantitative approach, incorporating time series data collected from 2018 to 2024. The data analysis method utilizes the Least Squares Technique with EViews 13 software. The research results indicate that choices related to foreign direct investment can be influenced by evaluating probability values, calculating the average of direct investment, median numbers, and standard deviation figures. The research results suggest that the FDI opportunity values, based on the elevated average FDI value compared to both the median value and Standard Deviation value, imply that FDI choices may produce more favourable outcomes over time. Modelling FDI decisions with the Least Square method produces very accurate results. This research concludes that upcoming studies should concentrate on identifying and analysing feasible FDI in economic sectors that enhance community well-being, thus proving that FDI successfully boosts a country's economy.

Keywords: Least square method, Foreign direct investment, Decision investment

JEL Code: C2, G23, F46

Orcid Number: 0000-0002-9870-2216

DOI: 10.7176/JESD/16-6-04

Publication date:August 31^st 2025