*Research Scholar, Department of Economics, School of Management, Pondicherry University, Puducherry-605014
**Assistant Professor, Department of Economics, Central University of Rajasthan, Bandarsindari, Kishangarh, NH-8, Dist-Ajmer-305801, Rajasthan
***Asst. Professor, Department of Economics, Utkal University, Bhubaneswar-751004
1Correspondence should be addressed to Dr. Aparajita Biswal, Department of Economics, Utkal University, Bhubaneswar-751004
JEL Codes: E2, E1, C5
The present study attempts to analyze the most debated present issue whether the traditional factors or the economic policy variables play a crucial role in determining the investment behavior in India over the period 1978–2011 or not. ADF test as a test for unit root and CUSUM test for stability test were conducted. To test for both the short run and long run effects among the variables, ARDL procedure was also employed. DOMCR, TED and RER were found to be statistically significant determinants of GFCAF both in the long run and in the short run. GROWTH was significant only in long run but in short run it is not significant. Cost of capital was also found to be significant both in the short run and long run. Importantly, the economic policy variables play a crucial role in determining the behavior of investment in India as compared to the traditional factors.
Gross Domestic Fixed Capital formation, Gross Domestic Product & ARDL
