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The Impact of Real Exchange Rate Volatility on Foreign Direct Investment Inflows in Tunisia

Author

Listed:
  • Sakli Hniya

    (PhD Student in Economics, University of Sfax, Tunisia, Tunisia;)

  • Ahlem Boubker

    (Higher Institute of Management of Gab s, Tunisia;)

  • Fatma Mrad

    (Faculty of Economics and Management of Sousse, Tunisia)

  • Sawssen Nafti

    (Higher Institut eof Management of Gab s, Tunisia.)

Abstract

This article aims to determine the impact of the Real Effective Exchange Rate (REER) and its volatility on Tunisian Foreign Direct Investment (FDI) Inflows for the period from 1980 to 2018. By applying the Auto Regressive Distributed Lag (ARDL) model, we noticed that an increase in exchange rate volatility tends to lower FDI inflows over a long-term horizon. We have also shown that an increase in REER, equivalent to a real appreciation (quotation at certain), will decrease FDI. While in the short term, the relationship between REER and FDI is positive, while volatility retains its negative long term effect.

Suggested Citation

  • Sakli Hniya & Ahlem Boubker & Fatma Mrad & Sawssen Nafti, 2021. "The Impact of Real Exchange Rate Volatility on Foreign Direct Investment Inflows in Tunisia," International Journal of Economics and Financial Issues, Econjournals, vol. 11(5), pages 52-67.
    • Handle: RePEc:eco:journ1:2021-05-7
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign Direct Investment; Real Effective Exchange Rate Volatility; ARDL Model; Tunisia;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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