Foreign Direct Investment, Export and Economic Growth in India: An Application of Ardl Model

Abstract

This study examines the causal nexus among Export, Economic Growth and Foreign Direct Investment (FDI) in India using the autoregressive distributed lag (ARDL) cointegration procedure on monthly data over the period 1992 to 2008. The stability of the short-run as well as long-run coefficients in the model is tested too. The analysis reveals a long run interrelationship among Export, Economic Growth and FDI in India. In the short run the study find the evidence of bidirectional relationship between Export and Economic Growth and a unidirectional causal relationship from Export to FDI. As a result, during the post liberalization period, trade liberalization has not only caused trade expansion but also increased the inflow of FDI in India which stimulate economic growth.

Keywords: Foreign Direct Investment, Export, Economic Growth, ARDL

JEL Classification: F21, F43