Exchange Rate Volatility and FDI Inflows

Hanusch, Marek; Nguyen, Ha; Algu, Yashvir

doi:10.1596/29911

Cited by 7 publications

(6 citation statements)

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“…This study concludes that the depreciation of the Ghanaian CEDI attracted FDI inflows, while exchange rate volatility discouraged such inflows, aligning with the researchers' initial expectations. Hanusch et al (2018) also report the discouraging impact of an increase in exchange rate volatility reducing FDI inflows in a panel of 80 developing and developed countries using data from 1990 to 2015. Warren et al (2023) employed a gravity model on a dataset comprising 40 countries from 2001 to 2019.…”

Section: Empirical Literaturementioning

confidence: 99%

How Does the Exchange Rate and Its Volatility Influence FDI to Canada? A Disaggregated Analysis

Lajevardi,

Chowdhury

2024

JRFM

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This study investigates the relationship between the real effective exchange rate (REER) and its volatility with the net inflow of foreign direct investment (FDI) to Canada, placing a novel emphasis on sector-level analysis. The study utilizes time series data from 2007 to 2022 and employs the autoregressive distributed lag (ARDL) approach to assess short-run and long-run relationships between the said variables. The findings reveal significant impacts of changes in REER, its volatility, and GDP on net FDI in the short run, with lasting effects of REER and its volatility, lagged GDP, and trade openness on FDI in the long run. At the sectoral level, FDI inflows in energy and mining, manufacturing, finance, and insurance exhibit significant sensitivity to changes in REER. Simultaneously, the volatility of REER has a significant impact on FDI inflows in manufacturing industries and the finance and insurance sector in the short run. In the long run, REER exerts a significant influence on the net FDI inflows in energy and mining, as well as manufacturing industries. The asymmetry in findings suggests a need for sector-specific attention to retaining and attracting FDI to Canada.

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Section: Empirical Literaturementioning

confidence: 99%

How Does the Exchange Rate and Its Volatility Influence FDI to Canada? A Disaggregated Analysis

Lajevardi,

Chowdhury

2024

JRFM

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“…3, No. 2, 2020 The Rand has been a volatile currency (Miyajima, 2019;Fowkes et al, 2016;Hanusch et al, 2018).…”

Section: Volatility Of the South African Randmentioning

confidence: 99%

“…Recent literature shows that the South African Rand is a volatile currency (for instance, Miyajima, 2019;Hanusch et al, 2018 that deters them from investing in the country. Modisaatsone and Motlaleng (2012) found the Rand/Pula exchange to have been highly volatile for the period 1993 to 2009.…”

Section: Volatility Of the South African Randmentioning

confidence: 99%

The Impact of Rand/Pula Exchange Rate Volatility on Botswana’s Economic Growth

Sebego¹,

Tsheko²,

Motlaleng³

2020

IJAFS

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This paper undertakes an investigation of the impact of the Rand/Pula exchange rate volatility on Botswana’s economic growth. The paper is using annual time series data, from 1977 to 2018. The Generalized Method of Moment (GMM) is employed to evaluate the impact of the real exchange rate volatility on Botswana’s economic growth. The GARCH model results found the Pula/Rand exchange rate to be volatile. The Rand/Pula exchange rate volatility does not have an impact on Botswana’s economic growth. This finding mirrors those of Kaur et al. (2019) and Musyoki et al. (2012). They found negative but insignificant impact of exchange rate volatility on economic growth in Malaysia and Kenya, respectively. Our empirical findings suggest that Botswana’s economic growth is largely explained by trade openness and growth of labour force and not influenced by the Rand/Pula exchange rate volatility.

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“…According to Cyntonn, the Kenya shilling was weakened for the sixth year in 2022, recording a depreciation of 9%, 3.6% and 7.7% in 20229%, 3.6% and 7.7% in , 20219%, 3.6% and 7.7% in , and 20209%, 3.6% and 7.7% in respectively (Cyntonn, 2023. Hanusch et al, (2018) highlights that volatility in currency is a potential deterrent to foreign investors since it increases the variance of the returns of overseas investments.…”

Section: Introductionmentioning

confidence: 99%

Currency Fluctuations and Foreign Direct Investment in Kenya

Musembi,

Jagongo

2023

IJECOP

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Purpose: This study investigates the relationship between currency fluctuations and Foreign Direct Investment (FDI) in Kenya over the period from 2013 to 2022. Methodology: Employing a causal explanatory research design and time-series secondary data, the study identifies the trends and determinants of currency fluctuation and its relationship with FDI. Secondary data is collected from the CEIC website while PICOT is utilized to select the relevant studies for analysis. The correlation analysis is conducted using SPSS to determine the relationship between currency fluctuation and FDI. Findings: The analysis reveals mixed uptrend and downtrend in both variables, showcasing a substantial reduction in FDI in recent years. The correlation analysis establishes a statistically significant negative relationship between exchange rates and FDI, in alignment with the theory of hysteresis and option values. This underscores the impact of currency fluctuations on inducing uncertainty, resulting in reduced FDI due to high sunk costs and delayed investment decisions. Unique Contribution to Theory, Practice and Policy: The study fills a crucial gap in the existing literature by offering insights on the relationship between currency fluctuation and FDI in the Kenyan context. Policy implications stress on the importance of stabilizing the Kenyan Shilling, mitigating real shocks, and fostering economic diversification to enhance the attractiveness of Kenya to foreign investments. This study provides valuable guidance for policymakers, the Kenyan government, and stakeholders seeking to formulate strategies that promote a conducive environment for sustained FDI and economic growth in Kenya.

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Exchange Rate Volatility and FDI Inflows

Cited by 7 publications

References 0 publications

How Does the Exchange Rate and Its Volatility Influence FDI to Canada? A Disaggregated Analysis

How Does the Exchange Rate and Its Volatility Influence FDI to Canada? A Disaggregated Analysis

The Impact of Rand/Pula Exchange Rate Volatility on Botswana’s Economic Growth

Currency Fluctuations and Foreign Direct Investment in Kenya

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