International Journal of Financial Management

2024 | Volume 14 | Issue Issue 3

Examining the Effects of International Capital Flows on India Nominal Exchange Rate: Insights from an ARDL Model

1. Mahesh Kumar Bagarti – Sambalpur University, Sambalpur, Odisha, India.

2. Suprava Sahu – Sambalpur University, Sambalpur, Odisha, India.

Received
01-Apr-2025 		Accepted
- 		Published
01-Apr-2025
Abstract
This study explores how foreign capital flow influence fluctuations in India’s exchange rate. It uses an empirical approach, analysing 31 years of data from 1994 to 2024. This research focuses on measuring the relationship between foreign direct investments and portfolio investments, and long-term foreign loans and the exchange rate of India and the United States of America. The analysis utilising computer-automated trade econometric model sets out that these factors do affect the exchange rate but only in the short run, which translates to changes in the foreign exchange investments and debt increasing the movements in the exchange rate. As put in the theory, these studies show that capital flow leads to exchange rate shifts, but only in the short run as there are other variables that influence shifts in exchange rates trends in the long run.

DOI: https://doi.org/10.21863/ijfm/2024.14.3.002

Keywords Autoregressive Model, Exchange Rate, Foreign Capital
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