Empirical Analysis of the Causal Relationship between Nominal Exchange Rate and Foreign Direct Investment in India Using VAR (Vector Autoregression Model)

J. V. Ramana Raju; Dr. Mayuresh S. Gokhale

Empirical Analysis of the Causal Relationship between Nominal Exchange Rate and Foreign Direct Investment in India Using VAR (Vector Autoregression Model)

J. V. Ramana Raju * §

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Dr. Mayuresh S. Gokhale

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School of Graduate Studies, SBMJC, Bangalore.

Empirical Analysis of the Causal Relationship between Nominal Exchange Rate and Foreign Direct Investment in India Using VAR (Vector Autoregression Model)

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Abstract

The present study tries to establish a causal relationship between the nominal exchange rate and foreign direct investment in India using a time series data between 1992 and 2010. It tries to understand whether the fluctuation in the exchange rate in turn causes the change in the quantum of foreign direct investments inflows and vice-versa which is of enormous importance in the wake of unprecedented depreciation of Indian Rupee against US dollar. Our analysis uses unit root test and Johenson cointegration test to show whether the variables under consideration exhibit stationarity and a long run association respectively. The test indicates absence of any long term association between the two variables under consideration. In the present context it appears that the data is not stationary at level and is stationary at first difference. The Vector Auto regression (VAR) model depicts that the coefficients do not have any long run association.

References

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

J. Raju, Dr. Gokhale. 1970. "Empirical Analysis of the Causal Relationship between Nominal Exchange Rate and Foreign Direct Investment in India Using VAR (Vector Autoregression Model)". Global Journal of Management and Business Research GJMBR Volume 12 (GJMBR Volume 12 Issue 22).

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GJMBR Volume 12 Issue 22

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

ADF (augmented dickey fuller)co-integration depreciation foreign direct investment unit root

Classification

GJMBR Classification JEL Code: F35

Submission ReceivedFebruary 4, 2012
Peer Review Double Blind
Handling Editor
Accepted March 1, 2012
Published March 15, 2012

Version of record

v1.2

Issue date

December 22, 2012

Language

English

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Article Matrices

Total Score: 154

Country: India

Subject: Global Journal of Management and Business Research

Authors: Dr. Mayuresh S. Gokhale, J. V. Ramana Raju (PhD/Dr. count: 1)

View Count (all-time): 309

Total Views (Real + Logic): 6176

Total Downloads (simulated): 504

Publish Date: 2012 03, Thu

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Total Views: 6.2K

Total Downloads: 504

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