An analysis of causal nexus between foreign direct investment, exchange rate and financial market development in Nigeria (1970 to 2009)
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Date
2012
Authors
Saibu, Olufemi Muibi
Journal Title
Journal ISSN
Volume Title
Publisher
African Journal of Economic and Sustainable Development (AJESD)
Abstract
The study investigated the causal relationship between FDI,
exchange rate and financial market development using quarterly data from
Nigeria. This was with a view to determine whether there existed any
significant causal nexus was from FDI exchange rate to financial market
development or the other way round in Nigeria. The study adopted vector error
correction mechanism. Exchange rate was included with a view to determining
whether macroeconomic instability adversely affected financial market
development in Nigeria. The results show that FDI had no significant causal
effect on financial market development while there are bidirectional causality
between financial market development and exchange rate. In addition, a further
analysis of effects of FDI and exchange rate on financial market development
showed that both FDI and exchange rate had negative effects on financial
market development; thus implying that FDI and macroeconomic instability
adversely affect the development and provision of financial services in Nigeria.
Description
Keywords
financial market development; FDI; exchange rate; VEC and causality; Nigeria.
Citation
Saibu M.O (2012) An Analysis of Causal Nexus between Foreign Direct Investment, Exchange Rate and Financial Market Development in Nigeria (1970 to 2009) African Journal of Economic and Sustainable Development (AJESD) Vol 1 No 1 Pp 95 -103 Switzerland