India's outward foreign direct investment: the home-country economic perspective

Abstract

The paper examines the impact of home-country macroeconomic factors such as gross domestic product (GDP), money supply and inflation on the growth of outward foreign direct investment (OFDI) from India. Vector error correction model is employed to explore the long-run dynamics and short-run causality between the macroeconomic factors and OFDI for the period 1980-2014. The study finds that GDP has positive and significant impact on OFDI whereas money supply and inflation have significant but negative impact on it in the long-run. However, in the short-run, no causality is witnessed between OFDI and macroeconomic factors specified in the model.