Impact of FDI and BOP Current Account on INR/Euro Exchange Rate Evolution in India
Abstract
Balance of Payments, Foreign Direct Investment, and currency exchange rate impact each other and
vice versa. This study was conducted to show how the INR/EUR exchange rate fluctuated over time in
relation to India’s current account of the balance of payments and its FDI inflows. A sum of 263 articles was identified after an initial search from databases like Web of Science, Google Scholar, research gate, and Scopus databases. 95 articles were selected based on keywords, titles, abstracts, contents, and contributions after the second screening. After the final screening, 28 papers were found and examined based on the impact factor, citations, and review procedure. Increases in both FDI and the current account of the balance of payments were shown to positively affect the INR/EUR exchange rate over the long run. Forecasts of future exchange rates are routinely made by economists and investors to extract monetary value. Many variables, including inflation rates, growth forecasts, political stability, and economic policies, influence the relative value of currencies among nations. Most of these things are hard to foresee. Because of this, the future of exchange rates is as unpredictable as the future of everything else. Therefore, there are challenges for market participants in making judgments based on anticipated future exchange rates.
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