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

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  • Nitin Arora
  • Kriti Sharma

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.

Suggested Citation

  • Nitin Arora & Kriti Sharma, 2025. "Determinants of intra-regional capital flows in South-Asia - a multilevel generalized structural equation modelling based gravity analysis of intra-SAARC FDI," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 18(3), pages 721-741, September.
    • Handle: RePEc:taf:macfem:v:18:y:2025:i:3:p:721-741
    DOI: 10.1080/17520843.2023.2170069
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