Abstract
We look into the dynamic relationship between: monetary policy, stock market and FII inflows. Moving forward from the sparse literature on exploring the interlinkages between FII inflows and stock returns on one hand and between monetary policy and capital flows on the other, we have, for the first time, looked at two determinants of FII inflows in conjunction. We find that a conscientious monetary policy, actively engaged in stabilizing the foreign exchange market whilst maintaining a high interest rate regime through open market sale of government securities to attract capital flows, together with stock market returns determine FII inflows.
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