Investigation of Casual relationship between FIIs’ Investment and Economic Growth: Evidence from India
Published: 2011
Author(s) Name: Dr. Sanjeet Sharma
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Abstract
The current study makes an attempt to study casual
relationship between FIIs inflows and economic
growth in India. The study covers the period from
1996 to 2009. The present study is based on quarterly
data of Net FII inflows and GDP of India. The
empirical relationship between FII inflows and
economic growth has been examined using Engle-
Granger Cointegration test, Granger Causality test
and VAR modal. The results of the study have
provided no support for the hypothesis that FII inflows
have the potential of influencing the process of
economic growth in India. Further, the results of the
study have also revealed that economic growth is
not a significant determinant of FII inflows in India.
Hence, it makes clear that FII inflows in India are
not attracted by macro economy development in India
Thus, it can be concluded from the study that wealth
created in Indian stock market with the help of FII
inflows not increases real wealth of the country
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