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The Effect of Exchange Rate and Inflation on Foreign Direct Investment and Its Relationship with Economic Growth in Nigeria

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  • Alex Ehimare OMANKHANLEN

    (Department of Banking and Finance, Covenant University, OTA, Ogun State, Nigeria)

Abstract

This study is on the effect of exchange rate and inflation on foreign direct investment and its relationship with economic growth. Its main objective is to find the effect of inflation and exchange rate and the bidirectional influences between FDI and economic growth in Nigeria. A thirty year period was studied. A linear regression analysis was used on the thirty year data to determine the relationship between inflation, exchange rate, FDI inflows and economic growth. The study reveals that FDI follow economic growth occasioned by trade openness which saw the entry of some major companies especially the telecommunication companies, while Inflation has no effect on FDI. However exchange rate has effect on FDI.

Suggested Citation

  • Alex Ehimare OMANKHANLEN, 2011. "The Effect of Exchange Rate and Inflation on Foreign Direct Investment and Its Relationship with Economic Growth in Nigeria," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 1, pages 5-16.
    • Handle: RePEc:ddj:fseeai:y:2011:i:1:p:5-16
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    References listed on IDEAS

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    1. Dunning, John H & Rugman, Alan M, 1985. "The Influence of Hymer's Dissertation on the Theory of Foreign Direct Investment," American Economic Review, American Economic Association, vol. 75(2), pages 228-232, May.
    2. Tsai, Pan-Long, 1991. "Determinants of foreign direct investment in Taiwan: An alternative approach with time-series data," World Development, Elsevier, vol. 19(2-3), pages 275-285.
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    Cited by:

    1. Francis Kagotho & Lenity Mugendi & Joseph Nzomoi, 2024. "Effect of External Debt on Inflation in Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(8), pages 3959-3969, August.
    2. Ali, Muhammad Ali & Asfand, Asfand Yar Khattak & Bakhtiyar, Bakhtiyar Khan & Hammad, Raja Hammad Amhed, 2014. "Financial Risk and Foreign Direct Investment: Evidence from Pakistan Economy," MPRA Paper 60779, University Library of Munich, Germany, revised 12 Dec 2014.
    3. Kunofiwa Tsaurai, 2018. "Investigating the Impact of Inflation on Foreign Direct Investment in Southern Africa," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 14(4), pages 597-611, AUGUST.
    4. Muhammad Mahmud Mostafa, 2020. "Impacts of Inflation and Exchange Rate on Foreign Direct Investment in Bangladesh," International Journal of Science and Business, IJSAB International, vol. 4(11), pages 53-69.
    5. William Bekoe & Talatu Jalloh & Wassiuw Abdul Rahaman, 2021. "Corruption and Foreign Direct Investment Inflows: Evidence from West Africa," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 14(3), pages 7-25, December.
    6. Andreea TRIMBITAS & Andrei VECERDEA, 2013. "Foreign Direct Investment Drivers in Romania," Expert Journal of Finance, Sprint Investify, vol. 1(1), pages 33-42, December.
    7. Fuat Sekmen & Haşmet Gökirmak, 2020. "Inflation and foreign direct investment in Turkey," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 60, pages 70-79.
    8. Irza Hanie Abu Samah & Intan Maizura Abd Rashid & Wan Ahmad Fauzi Wan Husain & Suraiya Ibrahim & Hariri Hamzah & Mohammad Harith Amlus, 2020. "The Impact of Healthcare Expenditure and Healthcare Sector Growth on CO2 Emission using Dynamic Panel Data System GMM Estimation Model during COVID 19 Crisis," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 235-241.
    9. Shah, Mumtaz Hussain & Zeb, Aisha, 2017. "Prudent Macro Management of the Economy and Inward FDI in ASEAN Member States," MPRA Paper 107249, University Library of Munich, Germany.
    10. Okafor, Luke Emeka & Hassan, M. Kabir & Rashid, Mamunur & Prabu, Darniya & Sabit, Ahmed, 2022. "Risk dimensions, risk clusters, and foreign direct investments in developing countries," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 636-649.
    11. Kimiagari, Salman & Mahbobi, Mohammad & Toolsee, Tushika, 2023. "Attracting and retaining FDI: Africa gas and oil sector," Resources Policy, Elsevier, vol. 80(C).
    12. Prince Jaiblai & Vijay Shenai, 2019. "The Determinants of FDI in Sub-Saharan Economies: A Study of Data from 1990–2017," IJFS, MDPI, vol. 7(3), pages 1-31, August.

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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