Assessing the spillover effect of normalising unconventional monetary policy of the Federal Reserve in the United States on capital flows in India

Khanna, Akhil (2019) Assessing the spillover effect of normalising unconventional monetary policy of the Federal Reserve in the United States on capital flows in India. Masters thesis, Dublin, National College of Ireland.

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Abstract

In this research paper, we examine the indirect effect on capital flows, specifically in terms of Foreign Direct Investment in India, on account of the normalisation of unconventional monetary policy by the Federal Reserve in the United States. The importance of U.S. dollar currency has been explained and justified in the context of this research. The literatures revolving around the topical issue of non-standard monetary policy of the Federal Reserve has been discussed. We frame our research question, providing an appropriate rationale for this research. We consider quantitative analysis as the preferred methodology to understand the impact on capital flows. Within this methodology we use the statistical techniques of correlation and multiple regression analysis to statistically verify the difference in the capital flows. We choose a dataset for the period between 2008 to 2018 on macroeconomic indicators such as GDP, Inflation, Foreign Exchange rates of India and Fed Reserve fund rates and monetary base (MBase) of the U.S. economy as explanatory variables to assess the outcome in the variation of FDI in India. The analysis conclude that Federal Reserve fund rates and monetary base (total amount of money circulation) in the U.S. contribute negatively to FDI inflow in India whereas Inflation and Foreign Exchange rates are statistically significant explanatory variables in determining the effect on FDI flow to India. Hence, this paper makes an attempt to contribute to the existing literatures on the topic of unconventional monetary policy impact by developed central banks on capital flows to Emerging Markets.

Item Type:	Thesis (Masters)
Subjects:	H Social Sciences > HG Finance H Social Sciences > HG Finance > Investment > Capital Formation H Social Sciences > HG Finance > Investment > Foreign Direct Investment
Divisions:	School of Business > Master of Science in Finance
Depositing User:	Caoimhe Ní Mhaicín
Date Deposited:	17 Oct 2019 14:19
Last Modified:	17 Oct 2019 14:19
URI:	https://norma.ncirl.ie/id/eprint/3971

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