The Role of Foreign Direct Investment, Inflation Rate, Exchange Rate, and Domestic Savings in Stock Market Development

Abstract

The study has been conducted with the intention to examine the role of foreign direct investment in developing host country’s stock markets and to examine whether they are related or not. Our research also looks to the impact of foreign direct investment along with inflation rate, domestic savings, and exchange rate and how it play its role in the development of host country stock markets in changing political environment. Inflation means rise in overall prices of commodities of a country and it impacts all the individuals in the economy from top to bottom. Although most of economists says that around 1 to 2% inflation is fruitful for an economy to grow. In present global competitive economic environments, no country in the world is self-sufficient and selfreliance. Most of them basically depend on other nations in some way. Advance economy with surplus reserves wants to join in other nations who have minerals reserves and skilled labors. Emerging economy in hope to become self-sufficient needs fund for their economic advancement and alliance, undeveloped economies needs funds for their survival and growth. Therefore, financial integration through foreign direct investment played dominant role and fast-track the respective economies. With growing globalization most of the Asian nations have greeted the foreign direct investment and witness surge in its inflow. If we talk about India, they had always conservative approach to globalization which has been found latecomer to the Foreign Direct Investment