Do Macroeconomic Indicators Stimulate FDI Inflows in India?
- 1 Department of Business Administration, Rajagiri College of Social Sciences (Autonomous), Kochi, India
Abstract
The current study mainly attempts to find out whether macroeconomic indicators actually stimulate the inflow of FDI into India. The study also attempted to check whether there is any long run or short run relationship between the macroeconomic indicators and FDI inflows into the country using regression analysis, Cointegration test, Granger causality and Vector error correction model. The results show that the explanatory variables captured in the model well explained the variations in FDI Inflows. However, not all the explanatory variables considered in the model are statistically significant in explaining the behavior of FDI. Unrestricted Cointegration Trace statistic and Max-Eigen statistics supports the existence of cointegrating relationship among the variables. The study also shows that SENSEX and NIFTY do granger cause FDI in the long run while, FDI does not granger cause neither of the two. S Vector Error Correction Model supports the absence of short-run relationship among the macroeconomic indicators and FDI inflows in India.
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