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Abstract
The present paper examines the relationship between foreign capital inflows and selected macro-economic aggregates using Johansen Cointegration approach. The monthly data of the various selected macro-economic variables, namely, foreign capital inflows, export, import, foreign exchange reserves, wholesale price index, index of industrial production as a proxy of gdp, real effective exchange rate, bse Sensex, exchange rate, openness and dummy for 2008 crisis for the period ranging from April 2000 to March 2015 were collected. Augmented Dickey-Fuller test of unit root was applied to test the stationarity and the integration order of selected variables. The results confirm that long-run equilibrium exists between the capital inflows and selected macro-economic variables. The coefficients of BSE Sensex, foreign exchange reserve, index of industrial production, exchange rate, openness are found positive and statistically significant. The coefficients of wholesale price index, import, export, and dummy for 2008 are found negative and statistically significant.