Asian Journal of Research in Business Economics and Management
Year : 2012, Volume : 2, Issue : 10
First page : ( 160) Last page : ( 173)
Print ISSN : 0000-0000. Online ISSN : 2249-7307.

Co-integration analysis of fiis and its determinants (An application of autoregressive distributed lagardl model)

Dr. Vohra Amandeep

Assistant Professor, Department of Commerce, Guru Nanak Girls College, Yamunanagar

Online published on 6 October, 2012.

Abstract

An economy, apart from everything else, is a highly fluid transmission mechanism. Its beauty lies in how the smallest of changes have the most complex trickle-down effects. A paradigmatic example of how seemingly minor policy changes can jumpstart the economy can be illustrated by examining the effects of liberalization on capital market in India. The prime and the foremost effect of liberalization on Indian economy was to open the borders of capital markets for Foreign Institutional Investors (FIIs) in order to overcome the problem of Balance of Payment (BOP) crises and to get rid from the debt capital, especially the short term debt. Since the time, the FIIs were allowed to enter in Indian market; India has witnessed billions of dollars as inflow and outflow. The present research work has been undertaken to analyze the co-integration that exists between the FII inflow and its probable determinants. ARDL model has been applied for the analysis of co-integration between the variables. The study has found long-run co-integration between the FII inflow and Return on Sensex, Market capitalization of Sensex, and the gold prices.

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Keywords

Foreign Institutional Investment, Liberalization, Balance of Payment Crises, Co-Integration, Autoregressive Distributed Model.

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