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Exchange rate volatility and Foreign Direct Investment in South Asia

Author

Listed:
  • Kamal P. Upadhyaya
  • Rabindra Bhandari
  • Robert Rainish

Abstract

This paper examines the effect of Real Exchange Rate Volatility (RERVOL) on the Foreign Direct Investment (FDI) inflow in Bangladesh, India, Pakistan and Sri Lanka. A model that includes exchange rate volatility with other determinants of FDI is developed. Annual time series data from 1976–2009 is used for India, Pakistan and Sri Lanka. In case of Bangladesh because of the data limitation only data series from 1986–2009 is used. A panel data from these four countries for a period of 1986–2009 is also constructed. Before estimating the model the time series properties of the data are diagnosed and an error correction model is developed. The estimated results show an inconclusive relationship between the exchange rate volatility and the FDI.

Suggested Citation

  • Kamal P. Upadhyaya & Rabindra Bhandari & Robert Rainish, 2011. "Exchange rate volatility and Foreign Direct Investment in South Asia," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 4(4), pages 366-377.
    • Handle: RePEc:ids:ijepee:v:4:y:2011:i:4:p:366-377
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    Cited by:

    1. Adil Suliman & Khaled Elmawazini & Mohammed Zakaullah Shariff, 2015. "Exchange rates and foreign direct investment: evidence for sub-saharan Africa," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(2), pages 204-226, April-Jun.
    2. Polyxeni Kechagia & Theodore Metaxas, 2022. "FDI and Institutions in BRIC and CIVETS Countries: An Empirical Investigation," Economies, MDPI, vol. 10(4), pages 1-23, March.

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