Determinants of foreign direct investment in nigeria 1980. Empirical investigation on exchange rate volatility and trade flows. This study examined determinants of nominal exchange rate fluctuations in kenya using an autoregressive distributed lag ardl approach over the period 1993q3 when kenya authorized floating exchange rate to 2014q4. Having obtained the volatility of exchange rate through the garch. Empirical investigation on exchange rate volatility and trade. Determinants of foreign direct investment in the nigerian. Empirical investigation on exchange rate volatility and trade flows in nigeria 26 by the ratio of total trade to nigerias gross domestic product gdp, nigeria is considered to be moderately integrated with a ratio of 45. This research sets out to investigate the relationship between exchange rate volatility and nigerias balance of payment. In a similar study, akpan 2008 investigated foreign exchange.
Empirical analysis of exchange rate volatility and nigeria. No matter which way currencies zig or zag, it seems there is always an analyst with a quotable, ready explanation. Section 3 outlines the empirical strategy and model specifications while section 4 presents the empirical results. Specific content for the schematic asset price model of the exchange rate is provided in sec. It is against this background that the study examined the impact of exchange rate on stock market performance using monthly data of mcap as indicators for stock market performance and monthly data on exchange rate as the parameter for measuring exchange rate volatility. This paper investigates the determinants of real exchange rate volatility in nigeria. The main objective of this study is to investigate the relationship of foreign direct investment fdi with exchange rate and exchange rate volatility. The determinants of exchange rate volatility in south africa trust r. The study found a positive relationship between interest rate, inflation, gdp and fdi over. The cardinal focus is to ascertain the determinants of exchange rate volatility instability in a developing economy with particular reference to nigeria as well as assess the implications of volatility of real exchange rate on selected macroeconomic variables. Having obtained the volatility of exchange rate through the garch 1,1 techniques, the ecm was used to examine. Determinants of stock market volatility and risk premia. At the present time, new members of the eu are trying to achieve this stability.
Having obtained the volatility of exchange rate through the garch 1,1 techniques, the ecm was used to examine the various determinants of exchange rate volatility in nigeria, while the co. It aimed at determining functional relationships that exist between gdp, wage rate, interest rate and relative openness index, and the extent to which each variable has influenced fdi inflow to nigeria. Impact of exchange rate volatility on nonoil export. Conceptual framework exchange rate is the price of a nation. Cbn lists inflation, others as determinants of exchange rate. Fdi flow into telecommunication sector, foreign exchange. This paper therefore, investigates the determinants of real exchange rate volatility in nigeria from 1981 through 2008. Similarly, since the collapse of the bretton wood system in 1973, there has been a renewed interest worldwide into the study of exchange rate volatility and its determinants. The determinants of interest rate spreads in nigeria. New evidence on the effect of exchange rate volatility on trade. Exchange rates play a vital role in a countrys level of trade, which is critical to most every free market economy in the world. Increases in interest rates cause a countrys currency to appreciate because higher interest rates provide higher rates to lenders, thereby attracting more foreign capital, which causes a rise in exchange rates.
We discuss the implications of the long and short run determinants of exchange rate volatility and the volatility growthnexus. The result further indicates that there is evidence of long run relationship between real exchange rate and two explanatory variables gross domestic product growth rate and trade openness. Its objective had been the provision of a deeper understanding of the causes of interest rate volatility and whether this has effects on the nigerian economy. Mordi said other determinants of exchange rate include economic fundamentals like gross domestic products gdp growth rate, balance of payments position, external reserves, interest rate movements, external debt position, productivity, market. The naira exchange rate depreciation and volatility is among the vast macroeconomic maladjustments which have unfolded in the nigerian economy in the recent past. Abstract the paper explored causes of interest rate volatility and its implications on the socioeconomic development of nigeria for the year 2000 2005 periods. The pricing of derivatives generates excess implied volatility of underlying. Request pdf the determinants of real exchange rate volatility in nigeria the naira exchange rate depreciation and volatility is among the vast. The impact of exchange rate fluctuation on the nigerian. Exchange rate volatility and trade flows some new evidence. The objective of this study is to determine the sources of exchange rate volatility in turkey for the period 19742016. Friedman 1953 had argued that exchange rate instability is a manifestation of economic volatility. The cardinal focus is to ascertain the determinants of exchange rate volatility instability in a developing economy with particular reference to nigeria as well as assess the implications of volatility of real exchange rate on. The study examined the short and longrun determinants of nominal exchange rate fluctuations in kenya.
Exchange rate volatility and trade flows international monetary. According to aliyu 2009, determinants of exchange rate include differentials in inflation rate, differentials in interest rate, current. Price, exchange rate volatility and nigerias agricultural. Exchange rate misalignment on nigerias economic growth using quarterly. The paper examines the determinants of interest rate spreads in nigeria using a panel of 12 commercial banks for the period 19862007. Adaramola 2016 examined the effect of real exchange rate volatility on export volumes in nigeria.
Exchange rate depreciation and the structure of sectoral prices in nigeria under an alternative pricing regime, 198689 by olu ajakaiye and ode ojowu, research paper 25. The data sourced for this study were from the central bank of nigeria statistical bulletin and nigeria stock exchange publications. Exchange rate volatility and stock market performance in. Interest rate, balance of trade, inflation, fdi and gd were considered as independent over the exchange rate as dependent variable. To achieve our objective, this paper consists of the following sections. The determinants of exchange rate volatility in south africa trust mpofu ersa working paper 604 may 2016.
Consequently sustained exchange rate volatility was thought to have led to currency crises. This study examines the determinants of exchange rate instability volatility of real exchange rate in a developing economy. The determinants of stock price volatility are estimated using the garch technique. Determinants of cash crop output volatility in nigeria. Exchange rate volatility is a widely discussed topic amongst economist and finance experts as it is a very important phenomenon in every economy, especially amongst developing nations. The determinants of real exchange rate volatility in nigeria. The timeinconsistency problem is reduced and real exchange rate volatility is minimal.
Hopper r eaders of the financial press are familiar with the gyrations of the currency market. Studies have revealed that economic openness, terms. Aside from factors such as interest rates and inflation, the exchange rate is one of the most important determinants of a countrys relative level of economic health. The macro economic variables are inflation, exchange rate gdp and interest rate. Pdf the determinants of real exchange rate volatility in. The determinants of real exchange rate volatility in. This paper therefore, investigates the determinants of real exchange rate. The determinants of exchange rate volatility in south africa. Exchange rate depreciation, budget deficit and inflation the nigerian experience b fy.
Essang 1973 and muroi 1989 also correlate crop output volatility in nigeria to poor policy on technology and land use acts. Juraj stanck cergeeiy january 2006 abstract exchange rate stability is not only a criterion for joining the emu but also a fundamental property of stable economic development. Anita mirchandani 20 analyzed the impact of macro economic determinants of exchange rate volatility in india. Causes of interest rate volatility and its economic. A case study of pakistan mahnaz muhammad ali 1, salma shaheen 2 nosheenshahzadi 3 abstract. This paper investigated the key determinants of fdi in the nigerian telecommunication sector.
In a similar way, several empirical evidences relate output volatility to inflation rate. Mpofuy university of cape town april 14, 2016 abstract this paper investigates the determinants of exchange rate volatil. Annual data on infrastructure, government expenditure, trade openness and market size, were sourced from the world development indicators wdi of the world bank. The result showed that real exchange rate has a positive effect on the economic growth. Changes in interest rate affect currency value and dollar exchange rate. Determinants of exchange rate volatility in south africa. This paper investigates the determinants of real exchange rate volatility in nigeria from 1981 through 2008.
The large impact that monetary variables have on exchange rate volatility implies that policymakers should maintain sound monetary. The determinants of real exchange rate volatility in nigeria ajao, mayowa g. Oct 28, 2015 the naira exchange rate depreciation and volatility is among the vast macroeconomic maladjustments which have unfolded in the nigerian economy in the recent past. Exchange rate is an important macroeconomic policy instrument which effects all macroeconomics variables. The presumption that trade is adversely affected by exchange rate volatility depends on a number of specific assumptions and does not necessarily hold in all cases, especially in a general equilibrium setting where other variables change along with exchange rates. Given that the determinants of exchange rate volatility change from time to time. There are many factors contributing to real exchange rate volatility.
The analysis of exchange rate fluctuation on nigerias. Asher 2012 examined the impact of exchange rate fluctuation on the nigeria economic growth for period of 1980 2010. Saharan africa excluding south africa and nigeria shows the highest average. The study employed the time series quarterly data for the period of 1970q12014q4. Given that agricultural output is influenced by prices among other factors, the depreciation of the naira and abolition of the commodity boards were expected to. The findings indicated that interest rate, previous stock return levels, money supply and exchange rate are the main determinants of stock returns in nigeria. Having obtained the volatility of exchange rate through the garch 1,1.
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