The Impact of Exchange Rate Volatility on Foreign Direct Investment in Emerging European Economies: Empirical Evidence from Hungary, Poland, and Romania

Exchange Rate Volatility and Foreign Direct Investment in Nigeria: An Econometric Investigation (1981–2023)

This investigation analyses the nexus between exchange rate volatility and foreign direct investment (FDI) inflows into Nigeria across the 1981–2023 period. Despite an extensive body of literature addressing exchange rate dynamics and the determinants of FDI, relatively few studies have examined the interactive channels through which exchange rate volatility influences FDI in developing economies when viewed within a long-term historical context. Grounded in Real Options Theory, the study evaluates whether volatility in Nigeria’s exchange rate discourages or stimulates FDI inflows. Annual secondary data sourced from the Central Bank of Nigeria statistical bulletin were used for the analysis. The econometric framework incorporated the Augumented Dickey fuller test for the stationarity ARCH/GARCH modeling for estimation, the Johansen cointegration approach, granger causality test and an error correction mechanism (ECM) to examine the short run and long run relationship. The empirical findings indicate the presence of exchange rate volatility, though its influence on FDI is statistically insignificant as revealed by the GARCH estimation. Evidence of long run cointegration is detected among the variables, confirming a linear relationship between exchange rate volatility, FDI and economic growth. The ECM confirms long run adjustment toward equilibrium. The study concludes that persistent exchange rate instability poses risks to Nigeria’s investment climate and recommends policy reforms aimed at macroeconomic stability, infrastructural development, institutional strengthening and security enhancement.

Exchange-Rate Volatility and Financial Stability in the Banking Sector: Distributional Evidence from G7 and High-Income European Economies

The present study examined how volatility in exchange rates shapes banking-sector financial stability across the G7 and six high-income European countries, consisting of 13 developed economies. The study analyses the time period from 2000 to 2023. To measure volatility, the present study employed the GARCH(1,1) conditional variance of monthly real effective exchange rates. Stability is measured through the following two supporting indicators: Bank Z-score (solvency) and Non-Performing Loan (NPL) ratio (credit quality). Our analysis combines the Fully Modified OLS and two-step System GMM for analysing long-run and dynamic effects. To assess distributional heterogeneity, Method of Moments Quantile Regression (MMQR) is employed, while Dumitrescu–Hurlin tests are used for examining causality. The results show that volatility in exchange rates significantly reduces bank solvency and elevates credit risk. These effects are highly uneven: the adverse impact falls on the most fragile banking systems—those in the lower quantiles of the Z-score distribution and the upper quantiles of the NPL distribution. Causality runs unidirectionally, moving from volatility to instability. Institutional quality, which is proxied by the rule of law and regulatory quality, is seen to significantly decrease the credit-risk channel but not the solvency channel. Our findings provide implications for developed economies and support targeted, fragility-sensitive macro-prudential policy.

The Impact of Exchange Rate Volatility on Corporate Import-Export Resilience: An Empirical Analysis Based on Panel Data from 30 Countries

{'en': "Amid heightened global economic uncertainty, exchange rate volatility has become a significant macroeconomic factor influencing firms' import and export activities. Using panel data from 30 countries spanning 2005–2023, this study employs a two-way fixed effects model to empirically examine the impact of exchange rate volatility on the resilience of corporate imports and exports. The findings indicate that: (1) exchange rate volatility exerts a significant negative effect on the resilience of corporate imports and exports, a result that remains robust after substituting the core explanatory variable and excluding crisis years; (2) GDP growth rate, trade openness, institutional quality, FDI inflows, and the share of industrial value added all significantly enhance import-export resilience, whereas inflation shows no significant effect; (3) heterogeneity analysis reveals that the negative impact of exchange rate volatility is similar in magnitude for both advanced and developing economies, but the explanatory power of exchange rate volatility is stronger in the model for developing economies. This study provides empirical evidence for understanding how exchange rate risk affects the stability of international trade and offers insights for exchange rate risk management and trade policy formulation."}

Financial Deepening, Global Exposure, and Economic Performance in Non-OECD Developed Economies: Evidence from Dynamic Common Correlated Effects Estimation

This study investigates the dynamic relationships among financial development, globalization, foreign direct investment (FDI), investment rates, and economic performance in 27 non-OECD developed economies over the period 1995–2024. Anchored on the endogenous growth framework, the study employs panel econometric techniques including pooled ordinary least squares (POLS), fixed effects (FE), Pesaran Cross-sectional Dependence (CD) tests, and the Dynamic Common Correlated Effects (DCCE) estimator to account for heterogeneity and cross-sectional dependence. Descriptive statistics indicate relatively high levels of globalization and financial development across the sampled economies, while the Pesaran CD results confirm significant cross-sectional dependence among all variables at the 1% significance level. The POLS results reveal that investment rate, financial development, and globalization positively and significantly influence GDP per capita, whereas FDI exhibits a negative short-run effect. Under the fixed effects model, human capital and investment rate maintain significant positive effects on growth. However, the DCCE estimation shows that investment rate remains positively significant, while financial development exerts a weak negative effect after accounting for dynamic heterogeneity and common global shocks. The lagged GDP per capita coefficient (1.0115) further confirms strong growth persistence across countries. Sensitivity analysis demonstrates that the estimated relationships remain stable after excluding crisis periods, indicating robustness of the findings. The study concludes that financial deepening, productive investment, and globalization remain important determinants of economic performance, although their effects depend significantly on institutional quality, macroeconomic stability, and the capacity of economies to absorb external shocks. The study recommends stronger financial sector regulation, investment-friendly policies, institutional strengthening, and coordinated macroeconomic frameworks to sustain long-run growth in non-OECD developed economies.

Empirical analysis of the effect of exchange rate volatility on share returns: Evidence from mining companies listed on the Johannesburg Stock Exchange, South Africa

Type of the article: Research ArticleAbstractExchange rate volatility is a critical macroeconomic risk factor in emerging markets, particularly for export-oriented sectors such as mining in South Africa. The South African mining sector is inherently affected by exchange rate volatility, yet it is the economy’s largest foreign-currency earner through the export of mining resources. The study examines the effect of exchange rate volatility on mining companies’ share returns within South Africa. The study applies the system Generalized Method of Moments (GMM) estimator to account for both endogeneity and dynamic effects, using panel data from 15 Johannesburg Stock Exchange-listed mining companies over the period 2011 to 2024. The empirical results reveal that exchange rate volatility has a positive and significant effect on the share returns of mining companies, with a coefficient of 0.808, and on total returns (1.094). This indicates that higher currency risk is related to higher return premiums. In contrast, a negative and significant relationship exists between exchange rate volatility and share prices (99.45), implying an adverse valuation effect during heightened uncertainty. Regarding the control variables, GDP growth has a positive effect on share returns (8.978), while oil prices exhibit a negative relationship (–0.327). The results of the study support the risk-return trade-off and the flow-oriented exchange rate approach. The study therefore shows that exchange rate volatility plays a dual role through the enhancement of returns while depressing valuations. This highlights the benefits of implementing currency risk management strategies for investors and policymakers.

The Symmetric and Asymmetric Impacts of Foreign Capital Inflows and Trade Openness on Africa’s Economic Growth: Evidence from Linear and Nonlinear Panel ARDL Models