The Elusive Connectedness between Foreign Direct Investment, Institutional Investment, Loans and Bank Credit in India
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Author: Shadman Zafar, Mudasir Ahmad Ganie, Shan Mohammad, Nazar Ali, Sayed Ahmad Wajih, Yousuf Khan2 and Muzffar Hussain Dar
Author Address: Assistant Professor, School of Commerce, Presidency University, Bengaluru-560064 (Karnataka), Senior Research Fellow, Department of Economics, Aligarh Muslim University, Aligarh-202 002 (Uttar Pradesh), Assistant Professor, Institute of Business Managemen
Keywords: ARDL, capital inflows, cointegration, domestic bank credit.
JEL Codes: E51, F33.
Abstract
The
study tried to attempt a dynamic linkage between capital inflows and bank
credit in case of India. The autoregressive distributed lag (ARDL) model was
applied from 1994 Q1 to 2016 Q3. The result found that FDI, FPI and Foreign
Loan affect domestic bank credit positively in the long run. Specifically, with
a one per cent increase in FDI, FPI and foreign loans increased bank credit by
0.13, 0.76 and 0.22 per cent, respectively. Hence FPI had the maximum impact,
followed by Foreign Loan and FDI. Furthermore, the result also revealed that
raising the monetary base of the country also increases bank credit, but the
exchange rate remains unaffected.
Description
Indian J Econ Dev, 2023, 19(4), 887-892
https://doi.org/10.35716/IJED-22458