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Does the current account balance influence foreign direct investment in the Indian economy? Application of quantile regression model

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  • Md. Hasanur Rahman

    (Sheikh Fazilatunnesa Mujib University)

Abstract

The primary objective of this study was to measure the influence of the current account balance (CAB) on foreign direct investment (FDI) in India’s economy by considering gross domestic product (GDP). As a result, India adopted economic liberalization in 1991 with the new policy support, and there appeared to be an increase in foreign direct investment in the country. The augmented Dickey–Fuller (ADF) test suggests the quantile regression (QR) method using time series data from 1975 to 2021. Moreover, the results indicate that gross domestic product and the current account balance have a positive impact on FDI. Because of the large volume of trade in India, the government should focus on the balance of payments and current account as a determinant of FDI. However, this study added value to existing literature with the best magnitude on foreign direct investment and international trade policy.

Suggested Citation

  • Md. Hasanur Rahman, 2023. "Does the current account balance influence foreign direct investment in the Indian economy? Application of quantile regression model," SN Business & Economics, Springer, vol. 3(5), pages 1-18, May.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:5:d:10.1007_s43546-023-00471-y
    DOI: 10.1007/s43546-023-00471-y
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    More about this item

    Keywords

    Current account balance; Economic growth; Foreign direct investment; Quantile regression; Trade balance;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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