Determinants of FDI and FPI Volatility: An E-GARCH Approach

Authors

Philip I. Nwosa, Federal University, Oye-Ekiti, Ekiti StateFollow
Omolade Adeleke, Federal University, Oye-Ekiti, Ekiti State

Keywords

E-GARCH, FDI, FPI, Nigeria, Volatility

Abstract

This study examined the determinants of Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) volatility in Nigeria. The study used annual data covering the periods 1986 to 2016 and the EGARCH approach was employed. The study observed that trade openness and world GDP were the significant determinants of FDI volatility, while domestic interest rate and stock market capitalization were significant determinants of FPI volatility in Nigeria. Other variables were insignificant in influencing volatility in FDI and FPI. Consequently, the study recommends the need for the prudent management of these determinants (with particular reference to indigenous variables) to ensure reduced volatilities in these capital flows which are essential for the growth of the domestic economy, particularly at this time when the Nigerian economy is in great need of foreign investment owing to the continuous variation in international crude oil price.

Publication Title

CBN Journal of Applied Statistics

Issue

2

Volume

8

Recommended Citation

Nwosa, Philip I. and Adeleke, Omolade (2017) "Determinants of FDI and FPI Volatility: An E-GARCH Approach," CBN Journal of Applied Statistics (JAS): Vol. 8: No. 2, Article 3.
Available at: https://dc.cbn.gov.ng/jas/vol8/iss2/3