Bounds Test Approach to Co-Integration and Causality between Foreign Investment Inflows and Exchange Rates Dynamics in Nigeria.
Journal Title: IOSR Journal of Humanities and Social Science - Year 2019, Vol 24, Issue 1
Abstract
This study was commissioned to investigate for long run and causal relationship between foreign investment inflows and exchange rate dynamics in Nigeria. Foreign capital is decomposed into foreign direct investment (FDI) and foreign portfolio investment (FPI) to enable us look at both the real and financial sectors of the economy. Results established that there exists a long run association between exchange rates dynamics and foreign capital inflows to Nigeria. This was evident by the values of bound test F-Statistic of 61.82058 and 33.18053 for foreign direct investment and foreign portfolio investment models respectively. The coefficients of error correction terms lagged one period in the short-run models of FDI and FPI are negative and statistically significant at 1% level, meaning that in the both models, the independent variables jointly and significantly cause FDI and FPI respectively at least in the short run. Furthermore, this study has established that, for Nigeria, exchange rate ranks as one of macroeconomic fundamental that exact significant influence in moderating foreign direct investment (FDI) flows, while its effect on foreign portfolio investment (FPI) movements appears to be inconsequential, meaning that exchange rate should not be contemplated as instrument for moderating foreign portfolio inflows in Nigeria.
Authors and Affiliations
BigBen Chukwuma Ogbonna
Keywords
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- EP ID EP443033
- DOI 10.9790/0837-2401064960.
- Views 60
- Downloads 0
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