Impact of exchange rate and exchange rate volatility on foreign direct investment inflow for Mauritius: A dynamic time series approach

2021 ◽  
Author(s):  
Warren Moraghen ◽  
Boopen Seetanah ◽  
Noor Sookia
Keyword(s):  
Time Series ◽  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Direct Investment ◽  
Exchange Rate Volatility ◽  
Foreign Direct Investment Inflow ◽  
Time Series Approach ◽  
Dynamic Time

scholarly journals Exchange Rate Volatility and Foreign Direct Investment

2020 ◽  
Vol 12 (3) ◽  
pp. 38
Author(s):  
Samuel Erasmus Alnaa ◽  
Ferdinand Ahiakpor
Keyword(s):  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Interest Rate ◽  
Gross Domestic Product ◽  
Real Exchange Rate ◽  
Direct Investment ◽  
Exchange Rate Volatility ◽  
External Factors ◽  
Conditional Heteroskedasticity ◽  
Data Set

The paper seeks to determine the effect of exchange rate volatility on foreign direct investment in Ghana from 1986 to 2017. The study adopted the Generalized Autoregressive Conditional Heteroskedasticity model to fit the data set from 1986-2017. The results indicate that, previous quarter information can influence current quarter volatility in Foreign Direct Investment. Real exchange rate, gross domestic product and treasure bill rate considered as external factors, are all found to be significant. This shows that, volatility from these factors can spillover to volatility in foreign direct investment.  To ensure stable inflow of foreign direct investment, we recommend that policies should gear towards stability in the forex market and interest rate among others.

scholarly journals Exchange Rate, Uncertainty and Foreign Direct Investment Inflow in West African Monetary Zone

2018 ◽  
Vol 20 (1) ◽  
pp. 1-12 ◽  
Author(s):  
Perekunah B. Eregha
Keyword(s):  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Direct Investment ◽  
Exchange Rate Volatility ◽  
Commodity Prices ◽  
Fixed Effect Model ◽  
West African ◽  
Effect Model ◽  
Exchange Rate Movements ◽  
Global Shocks

Exchange-rate movements are mostly unpredictable, and this tends to affect both trade and foreign investment flows. This is because foreign investors are unclear on the returns to investment decisions in such cases. Hence, this study examines the effect of exchange rate, its volatility and uncertainty on foreign direct investment (FDI) inflow in West African monetary zone (WAMZ). The study covers the period1980–2014, and the within estimator for the fixed effect model is employed. The study accounts for both exchange rate volatility and uncertainty measures which are anticipated and unanticipated exchange rate innovations measures, respectively. The results show that exchange-rate movements in WAMZ countries are more of unanticipated than anticipated innovations in affecting FDI inflow. Therefore, policies aimed at targeting exchange-rate stability are essential in the WAMZ countries since investors are profit maximizers; hence, investment uncertainties must be kept as low as possible. Also since WAMZ export sectors are primary products based, policies should be geared towards the diversification of the export sectors to combat unanticipated global shocks from commodity prices movement in having an effect on the exchange rate through the foreign exchange reserve channel.

scholarly journals Exchange rate volatility and its effect on intra-East Africa Community regional trade

2021 ◽  
Vol 4 (9) ◽  
pp. 43
Author(s):  
Thomas Mosbei ◽  
Silas Kiprono Samoei ◽  
Clement Cheruiyot Tison ◽  
Edwin Kipyego Kipchoge
Keyword(s):  
Foreign Direct Investment ◽  
Exchange Rate ◽  
East Africa ◽  
Money Supply ◽  
Direct Investment ◽  
Structural Adjustment ◽  
Exchange Rate Volatility ◽  
Fixed Effect Model ◽  
Foreign Direct Investments ◽  
Regional Trade

East Africa Community exchange rate volatility spiraled up when the countries adopted the Structural Adjustment Policies in early 1980s. The question that remains unanswered is whether exchange rate volatility hinders or promotes trade. The objective of this study was to determine the effect of exchange rate volatility and its effect on Intra-East Africa community regional trade. Unit root tests results indicated that some of the variables were stationary at levels and on first difference, all variables were I(1). Differenced panel data was fitted into the General Autoregressive Conditional Heteroscedasticity model to measure volatility. Hausman test showed that the fixed effect model was appropriate exchange rate, money supply, population and foreign direct investment significantly determines intra-East Africa Community regional trade. It was concluded that exchange rate volatility is observable in the Intra-East Africa region and further, exchange rate, money supply, population, and foreign direct investment significantly influenced intra-EAC regional trade. It is recommended that EAC member states should formulate policies that ensures exchange rate stability in the region to reduce unpredictability of exchange rate. Policies should be enacted to guarantee adequate money supply and encourage foreign direct investments.

scholarly journals Effects of Exchange Rate on Foreign Direct Investment Inflow in Nigeria

2019 ◽  
pp. 1-12
Author(s):  
Chukwurah, Josephine Chikwue
Keyword(s):  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Unit Root ◽  
Direct Investment ◽  
Foreign Direct Investment Inflow ◽  
Bounds Testing ◽  
Short Run ◽  
Bounds Testing Approach ◽  
Testing Approach ◽  
The Impact

Aims: This study examined the place of exchange rate in determining foreign direct investment inflow into the Nigerian economy using time series data from 1980 to 2017. Study Design:  Historical research design method was adopted for the study, it uses secondary sources and a variety of primary documentary evidence. Place and Duration of Study: Department of economics, faculty of social sciences, Nnamdi Azikiwe University, between September 2010 and May 2018. Methodology: The method adopted for this study was the Autoregressive Distributed Lag (ARDL) estimation approach and error correction mechanism within the framework of dynamic OLS (DOLS) estimation. The analysis began with a verification of the unit root properties of the variables. The Augmented Dickey Fuller (ADF) and Philips-Perron (PP) unit root procedures were employed and both tests indicate that the variables were integrated of either order I(0) or order I(1). This warranted the use of Bounds testing approach in determining the cointegration among the variables in the various equations in the selected countries. Analysis using the Bounds testing approach to cointegration confirmed the existence of long run relation among the variables of the models. In determining the impact of exchange rate on foreign direct investment inflow in Nigeria, we estimated an ARDL model. Results: The results indicate that exchange rate affects FDI in both the long and short run. The result also reveals that the impact of exchange rate on FDI in the short run continuous up to three periods after the initial disturbance. Conclusion: This study concluded that exchange rate appreciation will lead to increases in foreign direct investment inflow. The study therefore recommended, amongst others, that government should apply exchange rate regime that is competitive at the international market so as to attract more FDI inflow to the Nigeria economy.

scholarly journals The Effect of Exchange Rate Volatility on International Trade and Foreign Direct Investment (FDI) in Developing Countries along “One Belt and One Road”

2018 ◽  
Vol 6 (4) ◽  
pp. 86 ◽  
Author(s):  
Rashid Latief ◽  
Lin Lefen
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
International Trade ◽  
Exchange Rate ◽  
Direct Investment ◽  
Exchange Rate Volatility ◽  
Policy Coordination ◽  
Chinese Government ◽  
Conditional Heteroscedasticity ◽  
Autoregressive Conditional Heteroscedasticity

The “One Belt and One Road” (OBOR) project was started by the Chinese government with the aim of achieving sustainable economic development and increasing cooperation with other countries. This project has five major objectives, which include (i) increasing trade flow, (ii) encouraging policy coordination, (iii) improving connectivity, (iv) obtaining financial integration, and (v) fortifying closeness between people. This paper aims to analyze the effect of exchange rate volatility on international trade and foreign direct investment (FDI) in developing countries along “One Belt and One Road”. We selected seven developing countries which are part of this project, namely Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. We collected panel data for the period 1995 to 2016 from the U.S. Heritage Foundation, International Financial Statistics (IFS) (a database developed by the International Monetary Fund), and World Development Indicators (WDI) (a database developed by the World Bank). We applied Generalized Autoregressive Conditional Heteroscedasticity (GARCH) (1,1) and threshold-Generalized Autoregressive Conditional Heteroscedasticity (TGARCH) (1,1) models to measure the exchange rate volatility. Furthermore, we employed a fixed effect model to analyze the relationship of exchange rate volatility with international trade and FDI. The results of this paper revealed that exchange rate volatility affects both international trade and FDI significantly but negatively in OBOR-related countries, which correlates with the economic theory arguing that exchange rate volatility may hurt international trade and FDI. It can be concluded that exchange rate volatility can adversely affect international trade and FDI inflows in OBOR-related countries.

Sign in / Sign up

Export Citation Format

Share Document