There are several reasons why the dynamic interaction between FDI and inflation must be studied. First, Foreign Direct Investment is found as one of the important determinants of the process of economic growth and development of Sri Lanka. Therefore, the literature empirically examining the causal relationship between the inflation and FDI is significant because the rate of high inflation affects the inflows of FDI inflows into the economy of Sri Lanka and slows down the process of economic growth and development. The main objective of this study is to examine the linkages between FDI and inflation in Sri Lanka for the time periods from year 1978 to year 2017. The dependent variable of the model used in this study is Inflation and the independent variable of the model is FDI (Foreign Direct Investment). The data used in the model are the annual time series collected from Annual Report of Central Bank of Sri Lanka. The tools to analyze the data are graphical representation, Johansen Co-integration test, simple regression model, Residual Analysis, Stability Test, and Granger Causality Test. A long run relationship is found between the variables. The dependent variable: INF – Inflation is inversely related with the independent variable: FDI – Foreign Direct Investment. One-way causal relationship from FDI to INF is ensured. The forecast sample is ranged from 2009 to 2017. The simple regression model affirms the significant impacts of the FDI – Foreign Direct Investment on the INF – Inflation. The forecasting model derived from the simple regression model is rather incompatible to forecast the value of dependent variable (Inflation).

The purpose of the study to evaluate the contribution of foreign direct investment (FDI) and tourism receipts (TR) to Sri Lanka's gross domestic product (GDP). This study employs time series annual data for the period from 1978 to 2016 and EViews 10 econometrics software was used for the time series data analysis. Unit root test was done on the variables and the method chosen was the Augmented Dicky -Fuller test. Co-integration analysis was used for the long run relationship and the Granger causality test was performed to investigate the causal relationship. Recently a more conducive environment has been established after the three decade long ethnic war came to an end. In this context, the Sri Lankan government has taken positive measures to attract foreign direct investment and boost tourism in the country. This study intends to evaluate the contribution of Sri Lanka, as these two factors are considered to be very effective at increasing the GDP of a country. The empirical study shows that there is a positive and statistically significant relationship between the variable's TR and FDI to the GDP in the long run. Results of Granger causality test implied that the two-way causality promoted the economic growth of Sri Lanka.

Foreign Direct Investment (FDI)

This study examines the impact of infrastructure on tourism development in Sri Lanka with greater emphasis on road network. The time period used in this study are ranging from year 2005 to year 2017. The annual time series data are analyzed by using statistical package, E-Views 10 after the preliminary calculations by using Microsoft Excel. The unit root of the variables is tested by ADF test to test the stationarity of the time series data used in the model of this study. Co-integration is tested with the use of Engle–Granger. The relationship of causality between the variables is found by test of Granger Causality. The results show that infrastructure has significant short run as well long run positive impact on tourism. Two-way causal relationship is found between tourism sector and infrastructure. Further, this study recommends that the government should play its role in improving the infrastructure facilities to increase tourist’s arrival in Sri Lanka.

This study examines the dynamic linkages between food price inflation and its volatility in the context of Sri Lanka. The empirical evidence derived from the monthly data for the period from 2003M1 to 2017M12 for Sri Lanka. The relationship between inflation rate and inflation volatility has attracted more attention by theoretical and empirical macroeconomists. Empirical studies on the relationship between food inflation and food inflation variability is scarce in the literature. Food price inflation is defined as log difference of food price series. The volatility of a food price inflation is measured by conditional variance generated by the FIGARCH model. Preliminary analysis showed that food inflation is stationary series. Granger causality test reveals that food inflation seems to exert positive impact on inflation variability. We find no evidence for inflation uncertainty affecting food inflation rates. Hence, the findings of the study supports the Friedman-Ball hypothesis in both cases of consumer food price inflation and wholesale food price inflation. This implies that past information on food inflation can help improve the one-step-ahead prediction of food inflation variability but not vice versa. Our results have some important policy implications for the design of monetary policy, food policy thereby promoting macroeconomic stability.