Analysis of the Relationship between Credit Rating and Foreign Direct Investment in Indonesia

The purpose of studied is to determine whether there is a short-term and long-term influence and cointegration between Foreign Direct Investment, to the credit ratings of Indonesia provided by credit institutions such as Moody's (MO), S & P (SP) and Fitch (FIT). The studied uses secondary time series data from 1998-2016,which consists of data on the amount of direct investment that goes to Indonesia and the credit rating of the State of Indonesia. This research uses the Vector Autoregression (VAR) method which includes Johansen Cointegration test, followed by Vector Error Correction Model (VECM) estimation and also forecasting by Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD) analysis. The result of the VECM test there is two significant negative variables, the Johansen Co-Integration test shows that the four variables are cointegrated. The IRF and FEVD analysis show that the FIT variable has a significant or direct positive effect on the direct investment (FDI), in which the rise of the credit rating of the State of Indonesia may increase the amount of direct investment in Indonesia. While, other variables have no effect on direct investment in Indonesia.