The relationship between inflation and foreign direct investment is positively. Furthermore, bidirectional causality was established between GDP growth and FDI. Mar 29, Our results indicate that there is a long-run inverse relationship between the level of inflation and FDI inflow in South Africa, implying that a rise. smoothing possibility (FDI) reduces the real negative effects of inflation. . country finances to total financing, generating a relationship between FDI and the .How Interest Rates Affect the Market
On the other hand high inflation rate signifies the inability of the central bank to set appropriate monetary policies. It affects profitability as higher prices can lead to increased costs and lower profits.
Trends in inflation rate over the years Inflation in an economy is a measure of the degree of stability. Until recently in India Wholesale Price Index was used to measure the inflation rate for all policy purposes. However after the Urjit R.
Consumer price index accounts for the cost of day to day living. Average inflation rate in India Source: Planning Commission Average inflation rate in India has been high, at 9. India has seen both high and low inflation. Ininflation was at 9. The official consumer price index in the month of August was recorded at 5.
Impact of inflation rate on the inflow of foreign direct investment in India
This medium level inflation rate has made India a favorable destination for foreign investment in the recent years. Relationship between foreign direct investment and inflation in India An economic instability of a host country can be major factor determining the inflow of foreign investment.
A study by Hussaini tests the degree of correlation between different economic factors and foreign direct investment in India. Results from the Johanson co-integration test also show that there is long term relationship between inflation rate and foreign direct investment for the period The author found a negative coefficient of correlation of This implies that inflation rate and foreign direct investment are adversely related.
Impact of inflation rate on the inflow of foreign direct investment in India | Knowledge Tank
Co-integration between inflation rate and foreign direct investment However it has been found in another study that the correlation between foreign investment and inflation is moderately positive. In inflation rate was 4. This indicates that other factors of an economy also play a major role in determining the inflow of foreign investment Finance India May Another finding of a paper by Anitha, revealed an unexpected positive relationship between foreign direct investment and Inflation.
This finding was against the expected negative relationship for the period The elasticity coefficient between the variables was 0. It showed that one percent increase in the level of inflation led to an increase of 0. Denver Journal of International Law and Politics: Volume 27 3pp.
Determinants of Foreign Direct Investment in Kenya. Growth impact and determinants of foreign direct investment into South Africa. Journal of Economic Modelling: Volume 10 1pp.
Growth, employment and redistribution. Working Paper Series Inflation in South Africa. Cambridge Journal of Economics: Journal of Asian Economics, Volume 17 6pp. The effect of exchange rate on foreign direct investment and its relationship with economic growth in South Africa.
Department of Economics, University of Pretoria. Estimation of long-run demand for money: An application of long-run structural modelling to Saudi Arabia.
Economia Internazionale International Economics: Causality between financial development and economic growth: What drives carbon-dioxide emissions: Income or electricity generation? Evidence from Saudi Arabia. Journal of Energy and Development: Does inflation targeting make a difference? The determinants of foreign direct investment: Journal of Multinational Financial Management, Volume 16 2 ,pp. Pp 1 - 13 Nonnemberg, M. The determinants of foreign direct investment in developing countries.
The first ten years after apartheid: An overview of the South African Economy.