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This paper empirically examines the relationship between foreign direct investment, financial development and other macroeconomic variables like trade openness, domestic investment and labour force and that of GDP per capita in select South Asian countries, i.e. India, Sri Lanka and Pakistan for the period 1990–2018.

The study uses various econometrics tools such as Pedroni, Kao and Johansen–Fisher panel cointegration test, Panel FMOLS and DOLS and Granger causality in order to analyse the long-run and short-run dynamics among the variables under consideration.

The results of the panel data estimation techniques employed imply that there is a short-run causality running from GDP per capita to FDI and financial development, and results from FMOLS and DOLS indicate that FDI and financial development have positive impacts on GDP per capita in the countries under consideration.

In this paper, we use a dynamic macroeconomic modelling framework to examine the effect of FDI and financial development on per capita income in three major south Asian economies, which are categorized as three Non-Least Developed Contracting States under the South Asian Free Trade Area (SAFTA), 2006, established with an aim to facilitate free trade among them. Considering the diversity of the level of growth experienced by these economies, the study uses appropriate panel regression techniques. Therefore, in addition to proper formulation of policies directed towards scaling up of export and import levels, the respective authorities should also take care that the political stability and institutional quality are maintained.

The purpose of this paper is to empirically investigate whether market size and its growth rate, along with financial development indicators, affect human capital in selected south Asian economies over the time period from 1984 to 2015.

The stationarity of the variables are checked by LLC, IPS, ADF and Phillips–Perron panel unit-root tests. Pedroni’s and Kao’s panel co-integration approaches are employed to examine the long-run relationship among the variables. To estimate the coefficients of co-integrating vectors, both PDOLS and FMOLS techniques are used. The short-term and long-run causalities are examined by panel granger causality.

From the empirical results, the authors found that both the market size and financial development play an important role in the development of human capital in the selected south Asian economies. It is evident that a large market size and faster degree of financial development in the selected countries result in better human capital formation.

There are a number of studies on the impact of financial development indicators on human capital and economic growth, but there is hardly any study that considers market size and its growth rate along with financial development indicators with human capital in the context of south Asian economies. The study fills this research gap.