Indo-US Bilateral FDI and Current Account Balance: Developing Causal Relationship

Badar Iqbal (), Mohd Rahman and Turay Abdul
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Turay Abdul: Interim Chair, School of Business, Kentucky State University, Frankfurt (USA), Germany

Academic Journal of Interdisciplinary Studies, 2017, vol. 6, issue 1, 129-139

Abstract: Foreign Direct Investment and Current Account Balance are the two important macroeconomic variables considered in overall Balance of Payments (BOP). India and United States have progressed by investing in each other resources and has a significant share in their respective total FDI Inflows. FDI Inflows as per the BPM6 of IMF falls in the Capital Account of Balance of Payments (BOP). The balance of Current Account is related to Capital Account as Capital Account shows the mode of financing. It is through the Capital Account that the deficit of Current Account is financed. FDI is a long term source of financing for the country. The present study aims to develop a causal relationship between Indo-US FDI and Current Account Balance with the help of Granger Causality (Sims, 1980). The Toda and Yamamoto (1995) approach to Causality is followed in the study. The time period for the study is from 2001 to 2014. The study contains seven sections.

Keywords: Indo-US; FDI; Current Account Balance; Granger Causality (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ajinst:v:6:y:2017:i:1:p:129-139:n:6

DOI: 10.5901/ajis.2017.v6n1p129

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