Do Exchange Rate and Its Volatility Deter Foreign Direct Investment (FDI) to India?
Kumarasamy, Durairaj and Velan, Nirmala. (2012), "Do Exchange Rate and its Volatility deter Foreign Direct Investment in India?”, Indian Economic Journal, Vol. 60, No. 1, April-June, 2012, pp. 124-138.
17 Pages Posted: 15 May 2013 Last revised: 31 Oct 2013
Date Written: April 1, 2012
Abstract
This paper investigates the impact of exchange rate levels and its volatility on Foreign Direct Investment in India using quarterly data for the period 1996:2 to 2010:1. The study employed autoregressive distributed lag (ARDL) bounds testing approach to examine the long-run and short-run relationship. Both conditional variance and other measures of volatility have been used to generate exchange rate volatility. The study also considered factors that motivate the foreign investors’ decision to invest in India. The results indicated that exchange rate volatility deters FDI in India, suggesting that flexible but stable exchange rate system may be needed to successfully attract FDI inflows in India.
Keywords: Foreign Direct Investment, Exchange Rate, Volatility, ARDL
JEL Classification: F21, F41
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Exchange Rate, Exchange Rate Volatility and Foreign Direct Investment
By Kozo Kiyota and Shujiro Urata
-
The Impact of Exchange Rate Volatility on Us Direct Investment
By Holger Görg and Katharine Wakelin
-
Untying the Gordian Knot: The Multiple Links between Exchange Rates and Foreign Direct Investment
By Nigel Pain and Desiree Van Welsum
-
Macro Determinants of FDI Inflows to Japan: An Analysis of Source Country Characteristics
By Satomi Kimino, David S. Saal, ...
-
By Jie Qun Guo and Pravin K. Trivedi
-
By Jie Qun Guo and Pravin K. Trivedi
-
By Chia-ching Lin, Kun-ming Chen, ...
-
Exchange Rates and FDI: Goods Versus Capital Market Frictions
By Claudia M. Buch and Joern Kleinert
-
Exchange Rates and FDI: Goods Versus Capital Market Frictions
By Claudia M. Buch and Jörn Kleinert
