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Macroeconomic Dynamics of Foreign Portfolio Investment in India:An Empirical Analysis


Affiliations
1 Assistant Professor, Dept. of Commerce, Christ College, Irinjalakuda, Kerala, India
2 Research Scholar, Anna University, Chennai, India
 

Developing nations like India have been growing with adequate flows of foreign capital in their respective countries. Foreign Portfolio Investment helps to supplement domestic savings and meet the capital requirements. While India is one of the attractive destinations of foreign capital, these capital flows are volatile in nature. The present work aims at exploring the various macro-economic variables affecting the flow of Foreign Portfolio Investment (FPI) in India, by taking monthly data for a period of twenty two years. The causal factors of Foreign Portfolio Investors in India can be dissected with the assistance of Auto Regressive Distributed Lag model (ARDL). Indian stock market (BSE Sensex return) has positive Impact and macroeconomic determinant like Economic Growth (IIP) has substantial positive impact on FPI in India. But all other macroeconomic variables like Wholesale Price Index, Exchange Rate and dummy variable like financial crisis are insignificant with respect to the flows of FPI in India. In short, this study concludes that FPI inflows in India are determined by both stock market characteristics and dynamics of macroeconomic variables of Indian economy.

Keywords

Sensex, ARDL, ADF, AIC, Short-Run Dynamics, Long-Run Equilibrium.
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  • Macroeconomic Dynamics of Foreign Portfolio Investment in India:An Empirical Analysis

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Authors

Tom Jacob
Assistant Professor, Dept. of Commerce, Christ College, Irinjalakuda, Kerala, India
Rincy Raphael
Research Scholar, Anna University, Chennai, India

Abstract


Developing nations like India have been growing with adequate flows of foreign capital in their respective countries. Foreign Portfolio Investment helps to supplement domestic savings and meet the capital requirements. While India is one of the attractive destinations of foreign capital, these capital flows are volatile in nature. The present work aims at exploring the various macro-economic variables affecting the flow of Foreign Portfolio Investment (FPI) in India, by taking monthly data for a period of twenty two years. The causal factors of Foreign Portfolio Investors in India can be dissected with the assistance of Auto Regressive Distributed Lag model (ARDL). Indian stock market (BSE Sensex return) has positive Impact and macroeconomic determinant like Economic Growth (IIP) has substantial positive impact on FPI in India. But all other macroeconomic variables like Wholesale Price Index, Exchange Rate and dummy variable like financial crisis are insignificant with respect to the flows of FPI in India. In short, this study concludes that FPI inflows in India are determined by both stock market characteristics and dynamics of macroeconomic variables of Indian economy.

Keywords


Sensex, ARDL, ADF, AIC, Short-Run Dynamics, Long-Run Equilibrium.

References





DOI: https://doi.org/10.20968/rpm%2F2019%2Fv17%2Fi2%2F149814