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Macroeconomic Implications of Capital Inflows in India

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  • Masood, Tariq
  • Ahmad, Mohd. Izhar

Abstract

The study attempts to analyse the behaviour of some macroeconomic variables in response to total capital inflows in India using quarterly data for the period 1994Q1-2007Q4. Time trend of all variables except nominal effective exchange rate-both export and trade based and current account balance shows instability over the period of study. Current account balance is the only variable which is stationary in level form all other variables are stationary in first difference form. Cointegration test confirms the long run equilibrium relation between total capital inflows (TCI) and real effective exchange rate-both trade based and export based and between TCI and nominal effective exchange rate-export based. Granger causality test confirms the bidirectional causality between real effective exchange rate-export based and TCI and between foreign exchange reserve & TCI and unidirectional causality from TCI to real effective exchange rate-trade based.

Suggested Citation

  • Masood, Tariq & Ahmad, Mohd. Izhar, 2009. "Macroeconomic Implications of Capital Inflows in India," MPRA Paper 19299, University Library of Munich, Germany, revised 06 Oct 2009.
    • Handle: RePEc:pra:mprapa:19299
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    File URL: https://mpra.ub.uni-muenchen.de/101848/9/MPRA_paper_101848.pdf
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    References listed on IDEAS

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    1. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1994. "The Capital Inflows Problem: Concepts And Issues," Contemporary Economic Policy, Western Economic Association International, vol. 12(3), pages 54-66, July.
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    Cited by:

    1. O. P. C. Muhammed Rafi & M. Ramachandran, 2018. "Capital flows and exchange rate volatility: experience of emerging economies," Indian Economic Review, Springer, vol. 53(1), pages 183-205, December.

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    More about this item

    Keywords

    International Capital Inflows; Time Series Econometrics;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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