An empirical investigation of the relationship between the real exchange rate and net FDI inflows in Mauritius

2019 ◽  
Vol 11 (1) ◽  
pp. 63-74 ◽  
Author(s):  
Ashok Babubudjnauth ◽  
Boopendra Seetanah
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Content Type ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
The Impact ◽  
Time Series Methodology ◽  
Official Sources ◽  
The Relationship

Purpose The purpose of this paper is to find out the impact of real exchange rate on foreign direct investment (FDI) in Mauritius. Design/methodology/approach Autoregressive distributed lag time series methodology is used. Findings Real exchange rate depreciation enhances inflows of FDI in both the short and long run. Originality/value The research is original, and data used are from official sources.

Real exchange rate misalignment and economy

2019 ◽  
Vol 46 (1) ◽  
pp. 211-227 ◽  
Author(s):  
Hock Tsen Wong
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Manufacturing Sector ◽  
Economic Sectors ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Exchange Rate Misalignment ◽  
Productivity Differential ◽  
The Impact

PurposeThe purpose of this paper is to examine the impact of real exchange rate misalignment on economy and economic sectors, namely construction, manufacturing and mining and quarrying in Malaysia.Design/methodology/approachThe equilibrium real exchange rate and economic models are estimated using the autoregressive distributed lag approach.FindingsAn increase in productivity differential or reserve differential will lead to an appreciation of real exchange rate in the long run. An increase in positive (negative) real exchange rate misalignment will lead to an increase (decrease) in economy. An increase in long-run real exchange rate misalignment will lead to a decrease in economy. Real exchange rate misalignment or long-run real exchange rate misalignment can influence the manufacturing sector in Malaysia. More specifically, undervaluation will promote whereas overvaluation will hurt the manufacturing sector.Originality/valueReal exchange rate misalignment can be a policy to influence economy but may not be the best choice.

scholarly journals Currency Substitution and Exchange Rate Volatility in Nigeria: An Autoregressive Distributed Lag Approach

2021 ◽  
pp. 1-28
Author(s):  
Isaiah O. Ajibola ◽  
Sylvanus U. Udoette ◽  
Rabia A. Muhammad ◽  
John O. Anigwe
Keyword(s):  
Exchange Rate ◽  
Structural Breaks ◽  
Exchange Rate Volatility ◽  
Empirical Support ◽  
Currency Substitution ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
The Relationship ◽  
Real Exchange Rate Volatility

This study investigates the relationship between exchange rate volatility and currency substitution in Nigeria, using Autoregressive Distributed Lag (ARDL) model. After accounting for the presence of structural breaks, evidence from the findings shows that domestic interest rate and expected changes in exchange rate are important determinants of currency substitution. In addition, there is empirical support for a positive relationship between exchange rate volatility and currency substitution both in the short- and long-run. This implies that higher real exchange rate volatility is associated with an increased level of currency substitution. In view of these findings, the paper calls for sustained efforts by the monetary authority in containing exchange rate volatility and inflation as a way of curbing the spate of currency substitution in the country.

scholarly journals The impact of bank credits on non-oil GDP: evidence from Azerbaijan

2019 ◽  
Vol 14 (2) ◽  
pp. 120-127 ◽  
Author(s):  
Shahriyar Mukhtarov ◽  
Sugra Humbatova ◽  
İlgar Seyfullayev
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Theoretical Framework ◽  
Economic Literature ◽  
Integration Methods ◽  
Long Run ◽  
Rich Countries ◽  
The Impact ◽  
The Relationship

This study explores the relationship between bank credits, exchange rate and non-oil GDP in Azerbaijan, utilizing FMOLS, CCR and DOLS co-integration methods to the data spanning from January 2005 to January 2019. The results from the different co-integration methods are consistent with each other and approve the presence of a long-run relationship among the variables. Estimation results reveal that there is a positive and statistically significant impact of bank credits and exchange rate on the non-oil GDP in the long run for the Azerbaijani case which are in line with the expectations and with the theoretical findings discussed in theoretical framework section. This finding also indicates that a 1% increase in credit and real exchange rate increases non-oil GDP by 0.51% and 0.56%, respectively. The results of this paper are useful for the policymakers and promote the economic literature for further researches in the case of oil-rich countries.

Oil price and exchange rate nexus in Algeria: evidence from nonlinear asymmetric and frequency domain approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sidi Mohammed Chekouri ◽  
Abdelkader Sahed
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Frequency Domain ◽  
Granger Causality ◽  
Oil Prices ◽  
Oil Price ◽  
Wavelet Coherence ◽  
Content Type ◽  
Long Run ◽  
The Impact

Purpose This paper aims to examine the relationship between exchange rate and oil prices in Algeria over the period 2004Q1–2019Q4. Design/methodology/approach The nonlinear autoregressive distributed lag method is used to capture the potential asymmetric relationship among oil prices and the exchange rate. Frequency domain spectral Granger causality test is also applied to investigate the causal linkage between the two variables. The wavelet coherence is applied to analyze the evolution of this relationship both in time and frequency domains. Findings The empirical results reveal evidence of long-run asymmetric effects of oil price on Algeria’s real effective exchange rate (REER), implying that an increase in oil price causes a real exchange rate to appreciate, while a decrease in oil price leads to a real exchange rate to depreciate. More specifically, it is found that the impact of negative oil price shocks is higher than the one associated with positive shocks. The spectral Granger causality results further indicate that there is unidirectional causality running from oil price to REER in both medium and long run. The wavelet coherence findings provide evidence of some co-movement between the REER and oil price and point out that the oil price is leading real exchange rate in the medium and long terms. Originality/value This study contributes to the literature by investigating the asymmetric impact and the time domain causal linkage between oil price fluctuations and real exchange rate in Algeria.

scholarly journals The impact of FDI on Nigeria’s export performance: a sectoral analysis

2018 ◽  
Vol 45 (5) ◽  
pp. 1088-1103 ◽  
Author(s):  
Obiora G. Okechukwu ◽  
Glauco De Vita ◽  
Yun Luo
Keyword(s):  
Service Sector ◽  
Manufacturing Sector ◽  
Export Performance ◽  
Content Type ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Oil Exports ◽  
The Impact ◽  
Sectoral Fdi

Purpose The purpose of this paper is to examine the foreign direct investment (FDI)–exports relationship in Nigeria using disaggregated FDI and export data. Design/methodology/approach This paper applies the autoregressive distributed lag cointegration approach in examining the long-run relationship between FDI and exports. Findings The results suggest that aggregate FDI has a positive and statistically significant long-run impact on total exports. Once exports are disaggregated into oil and non-oil exports, the positive, cointegrating relationship holds only for oil exports. When disaggregated by sector, primary sector and manufacturing sector FDI have a positive and significant long-run relationship with both total exports and oil exports but service sector FDI does not appear to have any significant influence on Nigerian exports. Originality/value This is the first paper that employs both sectoral FDI and disaggregated export data to examine the FDI–exports nexus in Nigeria.

Exchange rate effect on money demand in Pakistan

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Iffat Zehra ◽  
Muhammad Kashif ◽  
Imran Umer Chhapra
Keyword(s):  
Exchange Rate ◽  
Money Demand ◽  
Demand Model ◽  
Content Type ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Non Linear ◽  
Short Run ◽  
Nardl Model

PurposeThis paper aims to examine association of money demand with key macroeconomic variables in Pakistan. The paper also investigates the asymmetric effect of real effective exchange rate (REER) on money demand.Design/methodology/approachThe study employs both linear autoregressive distributed lag (ARDL) and non-linear autoregressive distributed lag (NARDL) model. Annual data from 1970 to 2018 is used which is subjected to non-linearity through partial sum concept. Empirical analysis is conducted to prove if money demand is influenced by currency appreciation or depreciation, for long and short run.FindingsCointegration test indicates existence of a long-run relationship between money demand and its determinants. Results from NARDL model suggest negative relation between money demand and inflation in long and short run. Real income shows positive but a very minimal and insignificant effect on money demand in long and short run. Impact of call money rates is statistically significant and negative on M1 and M2. Wald tests and differing coefficient sign confirm presence of asymmetric relation of REER in long run with M2, whereas in short run we observe a linear, symmetrical relation of REER with M1 and M2. Stability diagnostic tests (CUSUM and CUSUMSQ) verify stability of M2 demand model in Pakistan.Practical implicationsResults signify that role of money demand is imperative as a monetary policy tool and it can be utilized to achieve objective of price stability. Additionally, exchange rate movements should be critically examined by monetary authorities to avoid inflationary pressures resulting from an increase in demand for broad monetary aggregate.Originality/valueThe paper contributes to scarce monetary literature on asymmetrical effects of exchange rate in Pakistan. Impact of variables has been studied through linear approach, but this paper is unique since it attempts to explore non-linear relationships.

Exchange rate misalignment and economic growth in India

2017 ◽  
Vol 9 (4) ◽  
pp. 414-434
Author(s):  
Vaseem Akram ◽  
Badri Narayan Rath
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Structural Break ◽  
Annual Data ◽  
Content Type ◽  
Distributed Lag ◽  
Exchange Rate Misalignment ◽  
The Exchange Rate ◽  
The Impact

Purpose The purpose of the paper is to examine the impact of exchange rate misalignment on economic growth in India using annual data from 1980 to 2014. Design/methodology/approach First, misalignment is measured, which is defined as the deviations of the actual real exchange rate (RER) from its equilibrium level. The equilibrium real exchange rate (ERER) is estimated using the auto-regressive distributed lag (ARDL) model by considering key macroeconomic fundamentals of the determinants of RER. Zivot and Andrews’ unit root with structural break is used to test the stationarity property of data. The impact of exchange rate misalignment on economic growth has been examined using ARDL and variance decomposition techniques. Findings Our results find an overvaluation of the exchange rate till 2000, and thereafter, an undervaluation of the exchange rate prevails in India. Further, the result indicates that an increase in exchange rate misalignment leads to a decrease in economic growth and vice versa. Moreover, a positive misalignment (overvaluation) hurts the economic growth and a negative misalignment (undervaluation) promotes the economic growth. Research limitations/implications From the policy perspective, the results highlight that India needs to maintain an appropriate exchange rate which can reduce the RER misalignment. It is better for the Reserve Bank of India (RBI)’s intervention to smoothen the fluctuations of the exchange rate to avoid the inefficiency in the allocation of resources. However, to minimize the RER misalignment, the intervention should be conducted only in the short run. Originality/value The study contributes to the existing literature by estimating the exchange rate misalignment for India and its impact on economic growth.

scholarly journals EVIDENCE OF AN ASYMMETRIC IMPACT OF THE DEVALUATION OF CURRENCY ON INFLATION:

2019 ◽  
Vol 4 (1) ◽  
pp. 101-103
Author(s):  
Ahmed Balarabe Musa
Keyword(s):  
Exchange Rate ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Non Linear ◽  
Short Run ◽  
Lag Model ◽  
Asymmetric Impact ◽  
The Impact

The research is aimed at evaluating the existence of asymmetry or otherwise of the impact of devaluation of currency on inflation in Malaysia for the period 1970 – 2017. Non-linear autoregressive distributed lag model (NARDL) was used as the evaluation econometric tool of the research. The findings of the study reveal that devaluation of currency has an inflationary impact in both short run and long run. Whereas, revaluation of currency does not have any impact neither in the short run nor in the long run. This confirms the upward flexibility of the impact of the increases in the changes in the exchange rate on inflation at the same time reaffirms its rigidity downward.

scholarly journals Determinants of Inflation Sources in Iraq: An Application of Autoregressive Distributed Lag (ARDL) Model

2019 ◽  
pp. 381-388
Author(s):  
Mohamed Khaled Al-Jafari ◽  
Hatem Hatef Abdulkadhim Altaee
Keyword(s):  
Exchange Rate ◽  
Money Supply ◽  
Budget Deficit ◽  
Bounds Testing ◽  
Correction Model ◽  
Speed Of Adjustment ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
The Impact

Most economists agree that the emergence of substantial inflationary pressure in Iraq was due to the monetary growth arising from large increase in the money supply by government to finance enormous budget deficit. This was true especially during the comprehensive sanction imposed on the country between 1990 till 2003. Others point out to exchange rate depreciations as another cause to inflation. Such controversy about the causes of inflation in Iraq has necessitated studying this phenomenon quantitatively. Our main contribution is to assess empirically the effects of money supply, exchange rate, and import on inflation in Iraq over the period 1995–2015. Using the ARDL bounds testing approach, we estimated the long-run effects of those variables on real inflation. In addition, we attempt to draw attention to the impact of changes in global prices on the phenomenon of inflation in Iraq. It is analyzed that money supply, exchange rate and import, changes inflation to 0.59, -0.85, and 0.11 percent points respectively by one percent rise in long-run. The Error Correction model with a negative sign remained statistically significant with the approximately 34% speed of adjustment to restore the equilibrium in the long-run, which was convergent quickly.

scholarly journals Mobile Money Use: The Impact of Macroeconomic Policy and Regulation

Economies ◽  
2021 ◽  
Vol 9 (2) ◽  
pp. 51
Author(s):  
Lorna Katusiime
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Financial Innovation ◽  
Macroeconomic Policy ◽  
Mobile Money ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Long Run ◽  
Short Run ◽  
The Impact

This paper examines the effects of macroeconomic policy and regulatory environment on mobile money usage. Specifically, we develop an autoregressive distributed lag model to investigate the effect of key macroeconomic variables and mobile money tax on mobile money usage in Uganda. Using monthly data spanning the period March 2009 to September 2020, we find that in the short run, mobile money usage is positively affected by inflation while financial innovation, exchange rate, interest rates and mobile money tax negatively affect mobile money usage in Uganda. In the long run, mobile money usage is positively affected by economic activity, inflation and the COVID-19 pandemic crisis while mobile money customer balances, interest rate, exchange rate, financial innovation and mobile money tax negatively affect mobile money usage.

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