Determinants of intra-regional capital flows in South-Asia - a multilevel generalized structural equation modelling based gravity analysis of intra-SAARC FDI

Nitin Arora and Kriti Sharma

Macroeconomics and Finance in Emerging Market Economies, 2025, vol. 18, issue 3, 721-741

Abstract: In this study, various determinants of intra-SAARC capital flows in terms of FDI have been investigated using Multilevel Generalized Structural Equations Model. Analysis proves (i) bulk of intra-SAARC FDI is found to be market-seeking or horizontal, indicating scarcity of vertical investment linkages between affiliate countries; (ii) the financial sector among SAARC nations need a significant development before expecting a positive relationship between intra-regional FDI and financial development; (iii) political fragility is not found to hinder intra-SAARC FDI and (iv) while intra-regional FDI in SAARC is dominated by Indian investments, Bangladesh and Sri Lanka are also rising as prominent regional investors.

Date: 2025
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DOI: 10.1080/17520843.2023.2170069

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