Breaking the Myth : Is the Time-Varying GDP Crash Risk Insulate Time-Varying FDI Crash Risk?

The government efforts to open FDI policies in certain sectors to 100 percent had provided significant increase in the growth of Foreign capital to India. Since 2014-15, there was a steady increase in the FDI inflows. But, since 2018-19, due to US-China trade war and other geo-political issues, the movement of investments has been shifted to India dramatically. As the figures revealed, from 2018-19 to 2019-20 the value of FDI improved from 62 US$Billion to almost 74.39 US$Billion and it is expected to grow further. The present research highlight the important dimension about whether there seems to be any major downside risks associated with FDIs (inflows) in relation to the growth in terms of GDP, and other factors like profits through commercial operations, amount of taxes paid both by capital and labour resources.To measure the crash risk a higher moment representation mainly with the use of conditional or low-frequency time varying skewness and kurtosis, both for individual macroeconomic factor and also at the co-movement level needs to be analysed. For considering the annual growth of GDP, only countries which have data of GDP available from 1970 till 2020 will be considered for analysis.The results shows wide time-varying characteristics of FDI net inflows higher moment risks patterns and their association with underlined macro-economic factors used in the study