How Foreign Capital React in South Asia? A Panel Data Analysis

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Abstract

The study examines the long run relation among foreign capital inflows (FCI) and per capita income (PCI) for selected South Asian states namely, Pakistan, Sri Lanka, Bangladesh and India by using pool data. Cointegration result indicating FCI and PCI are cointegrated with significant positive relationship. Hausman test confirms, fixed effect is a more appropriate technique for this model, and evidence of robustness report by dynamic ordinary least square and fully modified ordinary least square techniques as initial result. Causality test found causal relation among foreign capital and per capita income and discussed in final section with conclusion.