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Does the United States Bond Yield Affect Foreign Institutional Investor Inflows to India and Indian Stock Market?

Author

Listed:
  • Charumathi Balakrishnan
  • Habeebu Rahman

    (Department of Management Studies, Pondicherry University, India)

Abstract

We investigate the extent to which the United States (US) bond yield affects foreign institutional investor (FII) inflows and the performance of the Indian stock market using monthly time-series data from 2002 to 2021. We use the vector autoregressive model and apply the Granger causality test to investigate this relationship. We find no short- and long-run relationships among the US bond yield, FII inflows, and India’s stock market performance.

Suggested Citation

  • Charumathi Balakrishnan & Habeebu Rahman, 2022. "Does the United States Bond Yield Affect Foreign Institutional Investor Inflows to India and Indian Stock Market?," Asian Economics Letters, Asia-Pacific Applied Economics Association, vol. 3(4), pages 1-7.
    • Handle: RePEc:ayb:jrnael:75
    DOI: 2022/11/08
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    References listed on IDEAS

    as
    1. Anand, Abhishek & Chakraborty, Lekha S, 2019. "Impact of Negative Interest Rate Policy on Emerging Asian markets: An Empirical Investigation," MPRA Paper 99426, University Library of Munich, Germany, revised 2020.
    2. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 215-287.
    3. Ankita Bhatia & Nawal Kishor, 2013. "Impact of FII Investments on Stock Market Volatility and Foreign Exchange Reserves: The Indian Experience," Transnational Corporations Review, Ottawa United Learning Academy, vol. 5(3), pages 26-45, September.
    4. Marcel Fratzscher & Marco Lo Duca & Roland Straub, 2018. "On the International Spillovers of US Quantitative Easing," Economic Journal, Royal Economic Society, vol. 128(608), pages 330-377, February.
    5. Zhang, Dayong & Hu, Min & Ji, Qiang, 2020. "Financial markets under the global pandemic of COVID-19," Finance Research Letters, Elsevier, vol. 36(C).
    6. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 215-287.
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    More about this item

    Keywords

    US bond yield; Vector autoregression; Granger causality test; Foreign institutional investor inflows; Stock market performance;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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