Paper Title
Relationship between Foreign Capital Inflows and Macro-economic Aggregates: A Co-integration Approach
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Authors
kamalpreet kaur sandhu
Keywords
Key words: Foreign Capital Inflows, Foreign Exchange Reserves, Openness, Inflation Rate, Stationarity, Co-integration, Macro-economic.
Abstract
Abstract The present paper is attempted to examine the relationship between foreign capital inflows and selected macro-economic aggregates using Johansen Co-integration approach. The monthly data of the various selected macro-economic variables, namely, Foreign Capital Inflows (CI), Export, Import, Foreign Exchange Reserves, Wholesale Price Index, Index of Industrial Production as a proxy of GDP (IIP), Real Effective Exchange Rate (REER), BSE Sensex, Exchange Rate, Openness and Dummy for 2008 crisis for the period ranging from April 2000 to March 2015 were collected. Augmented Dickey Fuller test of unit rootwas applied to test the stationarity and the integration order of selected variables.Johansen Cointegration technique within the framework of Vector Error Correction Model (VECM) was used to find out the long run relationship between capital inflows and major macro-economic variables.The results confirm that long-run equilibrium exists between the capital inflows and selected macro-economic variables. It shows that the relationship between capital inflows and BSE Sensex, Foreign Exchange Reserve, Index of industrial production, Exchange rate, Openness is significantly positive.However, the relationship between capital inflows and Wholesale Price Index, Import, Export, and Dummy for 2008 is found significantly negative. Moreover, the coefficient of REER is found statistically insignificant. It is recommended that the Government of India should give focus on reducing the inflation rate, encourage trade openness in the market which would cause an increase in growth rate of the economy. The study also recommends that government should focus more on policies that are investment friendly and will help in attracting large foreign investment.
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How To Cite (APA)
kamalpreet kaur sandhu (July-2023). Relationship between Foreign Capital Inflows and Macro-economic Aggregates: A Co-integration Approach. INTERNATIONAL JOURNAL OF NOVEL RESEARCH AND DEVELOPMENT, 8(7), d265-d276. https://ijnrd.org/papers/IJNRD2307331.pdf
Issue
Volume 8 Issue 7, July-2023
Pages : d265-d276
Other Publication Details
Paper Reg. ID: IJNRD_202082
Published Paper Id: IJNRD2307331
Downloads: 000121978
Research Area: Commerce
Country: amritsar , punjab , India
Published Paper PDF: https://ijnrd.org/papers/IJNRD2307331.pdf
Published Paper URL: https://ijnrd.org/viewpaperforall?paper=IJNRD2307331
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