Time Series Analysis of Foreign Direct Investment and Economic Growth : A Case Study of India

The study investigates the relationship between the foreign direct investment (FDI) and Gross Domestic Product (GDP) over the period 1975-2013. Granger causality test & Johansen's co-integration test have been applied to explore the direction of causality & long run relationship between the variables foreign direct investment (FDI) and gross domestic product (GDP). The result shows that the FDI and the GDP are co-integrated and, hence, a long-run equilibrium relationship exists between them. It is observed that the FDI positively relate to GDP. In the Granger causality sense, FDI causes the GDP in the both long-run and short-run. There is bidirectional causality exists between FDI and GDP