Macroeconomic Dynamics of Foreign Direct Investment in India: An Empirical Analysis
Journal Title: PRAGATI: Journal of Indian Economy - Year 2018, Vol 5, Issue 2
Abstract
For the past few years, Foreign Direct Investment (FDI) has become the indicator for Economic Growth, especially in emerging economies. This paper empirically investigates the determinants of FDI flows in India by employing the Auto Regressive Distributed Lag (ARDL) model. The result confirm the existence of a long run equilibrium between the FDI and five explanatory variables, namely exchange rate, Wholesale Price Index, Index of Industrial Production, Trade openness and dummy variable (financial crisis). India’s Wholesale Price Index, Exchange Rate volatility and Index of Industrial Production have positively influence the flow of FDI in India and Trade Openness is negatively significant for the flow of FDI in India. The coefficient of the Error Correction Term (ECT) is highly significant with expected sign, which confirm the result of bound test for co-integration. The cumulative sum of recursive residual (CUSUM) test is used for measuring the stability of the model.
Authors and Affiliations
Tom Jacob, Thomas Paul Kattookaran
Keywords
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- EP ID EP625349
- DOI 10.17492/pragati.v5i2.14372
- Views 201
- Downloads 0
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