Foreign portfolio investment and economic growth : an asymmetric cointegration approach.
The present study attempts to analyze the long-run equilibrium relationship between foreign portfolio investment (FPI) and real Gross Domestic Product (GDP) by cointegration tests assuming asymmetric adjustment. Following Enders and Siklos (2001), the Engle-Granger two-step cointegration test is exp...
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| Main Authors: | , |
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| Format: | Monograph |
| Language: | English |
| Published: |
International Islamic University
2009
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/427/1/salina.pdf http://irep.iium.edu.my/427/ |
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| Summary: | The present study attempts to analyze the long-run equilibrium relationship between foreign portfolio investment (FPI) and real Gross Domestic Product (GDP) by cointegration tests assuming asymmetric adjustment. Following Enders and Siklos (2001), the Engle-Granger two-step cointegration test is expanding to incorporate an asymmetric error correction term. It is found that there exists asymmetric cointegration between net foreign portfolio investment and real GDP, when momentum-threshold autoregressive (M-TAR) model is conducted. However, the asymmetric cointegration is not existence using threshold autoregressive (TAR) model. From estimation of M-TAR error-correction model, the adjustment back to equilibrium is more significant following relative increase in FPI (above long-run value). However, the adjustment is diverted from equilibrium following relative decrease in FPI (below long-run value). |
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