Financial development, portfolio investments and the real economy in Africa

Asamoah, Michael Effah; Alagidede, Paul; Adu, Frank

doi:10.1016/j.ecosys.2021.100872

Cited by 6 publications

(2 citation statements)

References 34 publications

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“…Should we find both

β_{1}

and

β_{5}

to be positive, then fractional increases in volatilities will lead to increases in FDI based on increasing FD values up to the point where FDI is optimized. However, with the hindsight that volatilities deter capital inflows (Asamoah et al., 2016; Cavallari & d'Addona, 2013) and that FD attracts FDI (Agbloyor et al., 2014; Asamoah & Alagidede, 2021; Asamoah et al., 2021b), there is the probability of an adverse effect of EXRV and positive effect of FD on FDI. In such a scenario, we seek to determine the percentile levels of FD necessary to reduce any adverse impact of volatility on FDI and, if possible, to completely eradicate the negative impact.…”

Section: Data and Estimation Techniquementioning

confidence: 99%

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Exchange rate uncertainty and foreign direct investment in Africa: Does financial development matter?

Asamoah

Alagidede

Adu

2022

Review Development Economics

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The orthodox view is that uncertainty deters investments and, by extension, private capital inflows. Paying specific attention to the volatility of the domestic exchange rate, foreign direct investment (FDI), and financial development indicators, this study investigates the impact of exchange rate uncertainty on FDI and whether financial development matters in such association. We establish our empirical relationship with a system general methods of moments (GMM) two‐step robust estimator with orthogonal deviations. We found evidence supporting a nonlinear U‐shaped relationship between uncertainty and FDI and that the impact of uncertainty on FDI depends on varying levels of uncertainty. We also document that uncertainty deters FDI flows and that countries with a well‐functioning financial development can transform the adverse impact of volatility on FDI. However, curbing the adverse effect depends on the specific indicator and the threshold value of financial development (financial institutions or financial markets).

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“…Should we find both

β_{1}

and

β_{5}

Section: Data and Estimation Techniquementioning

confidence: 99%

“…Conceptually, they incorporate information on a broader range of financial development features for a wider array of financial agents” (Svirydzenka, 2016, p. 20). The index has recently been employed in the capital flows–Africa literature (see Asamoah & Alagidede, 2021; Asamoah et al., 2021b).…”

Section: Data and Estimation Techniquementioning

confidence: 99%