Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334101 
Year of Publication: 
2023
Citation: 
[Journal:] Asian Journal of Economics and Banking (AJEB) [ISSN:] 2633-7991 [Volume:] 7 [Issue:] 2 [Year:] 2023 [Pages:] 277-292
Publisher: 
Emerald, Leeds
Abstract: 
Purpose -The purpose of this paper is to investigate the impact of foreign direct investment (FDI) on the stock market development in Nepal. Design/methodology/approach - The study used Johansen cointegration approach to determine long-run relationship and VEC Granger causality test to check the causal relations between the variables. The sample covered annual time-series data for the period 1996-2020. Findings - The results suggest that FDI plays significant positive role in the stock market development in the long-run but inversely affect in the short-run. Unidirectional causality running from FDI to stock market development is observed in the long-run and bidirectional in the short-run. There is an insignificant positive relationship between exchange rate and FDI in the short-run. Banking sector development complements stock market development in the short-run but act as a substitute in the long-run. The statistically negative coefficient of exchange rate imply that the appreciation of the home currency encourage the development of the stock market in the long-run. Originality/value - The positive and statistical coefficients of cointegration results indicate that FDI complements the development of stock market in Nepal in the long-run. Furthermore, the depreciation of the domestic currency may potentially contribute to the foreign direct investments in Nepal.
Subjects: 
Cointegration
FDI
Johansen
Stock market development
Nepal
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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