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Does the current account balance influence foreign direct investment in the Indian economy? Application of quantile regression model

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Abstract

The primary objective of this study was to measure the influence of the current account balance (CAB) on foreign direct investment (FDI) in India’s economy by considering gross domestic product (GDP). As a result, India adopted economic liberalization in 1991 with the new policy support, and there appeared to be an increase in foreign direct investment in the country. The augmented Dickey–Fuller (ADF) test suggests the quantile regression (QR) method using time series data from 1975 to 2021. Moreover, the results indicate that gross domestic product and the current account balance have a positive impact on FDI. Because of the large volume of trade in India, the government should focus on the balance of payments and current account as a determinant of FDI. However, this study added value to existing literature with the best magnitude on foreign direct investment and international trade policy.

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Fig. 1

Source: WDI (2021)

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Data availability

The annual time series data from 1975 to 2021 has been collected by the World Development Indicators (WDI) published by the World Bank. However, the data availability statement (repository) has been covered by the following doi number: https://doi.org/10.17632/gk7538pfcx.1

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  1. Department of Economics, Sheikh Fazilatunnesa Mujib University, Jamalpur, 2000, Bangladesh

    Md. Hasanur Rahman

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Rahman, M.H. Does the current account balance influence foreign direct investment in the Indian economy? Application of quantile regression model. SN Bus Econ 3, 94 (2023). https://doi.org/10.1007/s43546-023-00471-y

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