The Capital Flow Volatility Spillover in Some Selected African Economies

Finance & Economics Review

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Field Value
 
Title The Capital Flow Volatility Spillover in Some Selected African Economies
 
Creator Kwarah, Abdullahi Murtala
Kaseeram, Irrshad
Rafindadi, Aliyu Sanusi
 
Subject Spillover, Foreign Direct Investments (FDI), Portfolio Investments (PI), asymmetric, capital flow volatility, Exchange rate volatility.
 
Description Purpose: The study conducted an empirical examination of the link between capital flows and exchange rate by examining the relative influence of FDI and FPI on the exchange rates.
Method: The study proceeded with the EGARCH model and the data sample covering the period from 1990-2016. The data were subjected to cross-country screening. The screening criteria are such that all the data that constitute capital in all sampled countries must have equal sample sizes. The measurement of capital flow in each of the sampled countries was restricted to two categories capital, namely, foreign portfolio investment (FPI) and foreign direct investment (FDI).
Results: The research establishes that the behavior of capital flow volatility spillover of the sample countries' currencies exchange rate differs, with only South Africa's and Morocco's currencies revealing some slight similarity and existence of asymmetric volatility spillover from capital flows to exchange rate. Additionally, the study discloses that capital flows spillover has a considerable effect on exchange rate volatility than harmful spillover. The study also observed that positive shocks associated with capital flow volatility affect exchange rate value in Botswana more than capital outflow. Further positive capital flow spillover impending from capital inflow has a considerable effect on exchange rate volatility than the harmful spillover impending from the capital outflow. Further, the positive capital flow spill over impending from capital inflow significantly affects exchange rate volatility more than the negative spillovers that emanate from the capital outflow. 
Implications:   This suggests that the monetary policy should consider options that can accelerate capital flow into the Moroccan economy. However, in South Africa for any given quantum of capital flow into the economy, the South African Reserve Bank must use instruments to affect stability; otherwise, the currency exchange rate could remain unstable. Thus, capital withdrawals out of the Egyptian economy will create domestic currency instability.
 
 
 
Keywords: Spill-over, Foreign Direct Investments (FDI), Portfolio Investments (PI), asymmetric, capital flow volatility, Exchange rate volatility.
 
Publisher Research & Innovation Initiative
 
Date 2021-04-24
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier https://riiopenjournals.com/index.php/finance-economics-review/article/view/272
10.38157/finance-economics-review.v3i1.272
 
Source Finance & Economics Review; Vol 3 No 1 (2021): Finance & Economics Review [Submission going on]; 1-22
2690-4063
10.38157/finance-economics-review.v3i1
 
Language eng
 
Relation https://riiopenjournals.com/index.php/finance-economics-review/article/view/272/106
 
Rights Copyright (c) 2021 Abdullahi Murtala Kwarah, Irrshad Kaseeram, Aliyu Sanusi Rafindadi
http://creativecommons.org/licenses/by-nc-nd/4.0
 

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