Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/261577 
Year of Publication: 
2020
Citation: 
[Journal:] Journal of Economic Structures [ISSN:] 2193-2409 [Volume:] 9 [Issue:] 30 [Publisher:] Springer [Place:] Heidelberg [Year:] 2020 [Pages:] 1-19
Publisher: 
Springer, Heidelberg
Abstract: 
The study seeks to foster fresh empirical evidence on how FDI is relevant to the foreign trade growth in India under a time-varying parameter model with vector autoregres-sive specification. The Johansen's cointegration test documents a significant and posi-tive long-run co-movement between FDI and foreign trade in India. The vector error correction model suggests a unidirectional long-run causality from foreign trade to FDI. However, the Granger causality test confirms a bidirectional short-run causal relation-ship between these variables. Further, the variance decomposition analysis approves strong exogeneity of foreign trade. Again, the impulse response function analysis reveals that the responses generated from a positive shock of foreign trade to FDI and vice versa are small and initially negative and thereafter remain persistently positive at a constant level. The study finally concludes that the absence of long-run causality from FDI to export is the result of much domestic market orientation of foreign investors and less emphasis on the export-oriented sectors in India.
Subjects: 
Foreign direct investment
Foreign trade
Export
Vector autoregressive specification
JEL: 
F13
F14
F21
C22
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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