INFLOWS OF FOREIGN CAPITAL AND ECONOMIC GROWTH – A CAUSALITY ANALYSIS WITH INDIAN DATA
INFLOWS OF FOREIGN CAPITAL AND ECONOMIC GROWTH – A CAUSALITY ANALYSIS WITH INDIAN DATA

Summary/Abstract: This study investigates the relationships between the flow of foreign capital and real economic growth over the period April-1994 to December-2015 in context of Indian economy. Brief theoretical justifications capture the inter-relation between financial sector and real economy. Vector Auto Regressive (VAR) model have been applied to explore causal relationship among the variables. Monthly data of the above stated variables are taken for the data analysis. In empirical analysis seasonality removed from the variables and unit root test for the stationarity analysis incorporated structural break, if any. The analysis reveals that relationship exists between inflow of foreign capital and economic growth. Bidirectional causal relationship is found between inflow of foreign institutional investment and industrial production.

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