Interactive Effects of Exchange Rate Volatility and Foreign Capital Inflows on Economic Growth in Nigeria
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Various literature have attested to the vital roles
of foreign capital inflow in bridging the savingsinvestment
gaps in the developing countries in other to
bring about the so much desired development. The
impediment of exchange rate volatility (EXRV) on
sourcing for this much desired foreign capital is also
notable. However it was observed in literature that the
negative effect of EXRV could be mitigated by the level of
financial development prevalent in the country. This study
investigates the interaction of financial development with
exchange rate volatility on one hand and of financial
development with capital inflows on the other hand. The
result of our GMM estimation indicates significant
positive effect of FDI, FD, interaction of FDI with FD and
interaction of EXRV with FD on GDP. However,
remittance, lag of EXRV and interaction of remittance
with FD has significant negative impact on GDP. This
study posits that government in its efforts to diversify the
economy for future growth should promote infrastructure
and adequate financial development that will attract FDI
to agric and agro allied industries and diversify
remittances from consumption into investment
Keywords
HB Economic Theory, HC Economic History and Conditions