Causal Relationship among Foreign Reserves, Exchange Rate and Foreign Direct Investment: Evidence From Nigeria

Yıl 2015, Cilt: 5 Sayı: 4, 884 - 888, 01.12.2015

Augustine C. Osigwe Maria Chinecherem Uzonwanne

Öz

This study scrutinized the Granger causality of foreign reserves, exchange rate (EXR) and foreign direct investment (FDI) in Nigeria. The results of
the augmented Dicky–Fuller and Philip–Perron unit root test for stationary of the variables showed that all the variables were non-stationary at levels,
but become stationary after first differences. The Johansen co-integration test revealed long-run relationship among the variables. The results of the
Granger causality test indicated unidirectional causality from EXR to foreign reserves. Consistently from lag one to lag two; unidirectional causality
existed from FDI to foreign reserves. At lag three, bidirectional causality was discovered between foreign reserves and FDI. Evidence of unidirectional
causality running from EXR to FDI in lags one and three, was revealed. No causality existed between the duos at lag two. Based on the findings it is
recommended that the policy makers establish the optimum EXR level that positively promotes foreign reserves and FDI.

Anahtar Kelimeler

Foreign Reserves, Exchange Rate, Foreign Direct Investment