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Role of Foreign Private Investment and Remittance in Stock Market Development: Study of South Asia

Author

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  • Malik, Saif Ullah

Abstract

This paper is an effort to study the role of foreign private investment and foreign remittance in the stock market development of three major South Asian Countries i.e. Pakistan, India and Bangladesh. Secondary data maintained by World Bank of 24 years from 1988-2011, are analyzed using E-view software. The dependent variable is stock market development (Market Capitalization) and the three independent variables are foreign remittance, foreign portfolio investment and FDI inflow. The stationarity of data is checked through ADF and PP tests. Correlation and co-integration tests are used. Further to check cause and effect relationship the Granger causality tests is used. The correlation results show that stock market development is correlated with FDI inflow, Portfolio Investment and foreign remittance respectively in all countries except negative correlation of 10.59 % between stock market development and Portfolio Investment in Bangladesh. The Granger Causality Tests result shows that FDI granger cause capitalization for India only. Capitalization granger causes FDI in Pakistan and India only. Portfolio investment granger causes in Pakistan and India only while Capitalization granger causes portfolio investment only in India. Foreign remittance granger causes capitalization for Bangladesh and India while Capitalization granger causes foreign remittance in Bangladesh.

Suggested Citation

  • Malik, Saif Ullah, 2013. "Role of Foreign Private Investment and Remittance in Stock Market Development: Study of South Asia," MPRA Paper 54530, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:54530
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    File URL: https://mpra.ub.uni-muenchen.de/54530/1/MPRA_paper_54530.pdf
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    References listed on IDEAS

    as
    1. Adam, Anokye M. & Tweneboah, George, 2008. "Foreign Direct Investment (FDI) and Stock market Development: Ghana Evidence," MPRA Paper 11261, University Library of Munich, Germany.
    2. Tokunbo S. OSINUBI & Lloyd A. AMAGHIONYEODIWE, 2010. "Foreign Private Investment And Economic Growth In Nigeria," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 5, pages 105-127, June.
    3. Oke, Micheal Ojo, 2012. "Foreign Direct Investment and the Nigerian Financial Sector Growth," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(2), pages 262-275, June.
    4. John C. Anyanwu, 2012. "Why Does Foreign Direct Investment Go Where It Goes?: New Evidence From African Countries," Annals of Economics and Finance, Society for AEF, vol. 13(2), pages 425-462, November.
    5. Bjuggren, Per-Olof & Dzansi, James & Shukur, Ghazi, 2010. "Remittances and Investment," Working Paper Series in Economics and Institutions of Innovation 216, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    6. Pablo A. Acosta & Nicole Rae Baerg & Federico S. Mandelman, 2009. "Financial development, remittances, and real exchange rate appreciation," Economic Review, Federal Reserve Bank of Atlanta, pages 1-12.
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    More about this item

    Keywords

    Foreign Private Investment; Foreign Remittance; Foreign Direct Investment (FDI); Stock Market Development; Foreign Portfolio Investment (FPI); South Asia;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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