The Impact of the Real Interest Rate, the Exchange Rate and Political Stability on Foreign Direct Investment Inflows: A Comparative Analysis of G7 and GCC Countries

Alshubiri, Faris

doi:10.1007/s10690-022-09360-0

Cited by 18 publications

(7 citation statements)

References 88 publications

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“…Some prior studies [25,33] emphasized the negative implications of GPR on macroeconomic variables. Related inferences are available in submissions of Alshubiri [3,4] in the case studies of western European, G7, and GCC countries.…”

Section: Resultsmentioning

confidence: 99%

A TVP-VAR assessment of the spillover effects of geopolitical risk shocks on macroeconomic variability: a study of the Ghanaian economy

Asomaning,

Hamayoon,

Uche

2024

Futur Bus J

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Our study verified the implications of the spillover of geopolitical risk (GPR) shocks to the economic crisis in Ghana. Our analysis employed the VAR-based spillover models by Diebold and Yilmaz (Int J Forecast 28:57–66, 2012; J Econ 182:119–134, 2014) and the Time-Varying Parameter Vector Autoregressive (TVP-VAR) connectedness approach by Gabauer and Antonakakis (Munich personal RePEc archive refined measures of dynamic connectedness based on TVP-VAR refined measures of dynamic connectedness based on TVP-VAR*, 2017). We scrutinized the interconnections and transmission mechanisms among key macro-financial variables spanning from 2000 to 2022. Our findings indicate that GPR is a fundamental source of shocks to the foreign exchange reserve (FXI), real exchange rate (REER), consumer price index (CPI), and debt. Other significant contributors include export (EXP) and import (IMP), with EXP standing out as the main shock transmitter. On the receiving end, CPI is most impacted by transmissions from IMP and GPR. Our study demonstrates that EXP and IMP are the top shock contributors, while FXI and CPI are the major recipients of these shocks. Such findings provide policymakers with valuable insights into the ramifications of geopolitical risk on the macroeconomic environment. Hence, policymakers are expected to provide necessary buffers to curb the influence of geopolitical risks on the economy.

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Section: Resultsmentioning

confidence: 99%

A TVP-VAR assessment of the spillover effects of geopolitical risk shocks on macroeconomic variability: a study of the Ghanaian economy

Asomaning,

Hamayoon,

Uche

2024

Futur Bus J

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“…[2] provides insights into how exchange rates play a pivotal role in determining patterns of trade volume between countries. Since the shift away from the Bretton Woods system in 1973, a wealth of literature has examined the influence of exchange rates on trade flows, exploring factors such as interest rates, inflation rates, and economic efficiency as sources of exchange rate fluctuations [3][4][5].…”

Section: Real Exchange Rate Fluctuations and Trade Balancementioning

confidence: 99%

“…(1) Interest Rates: Changes in interest rates have been widely recognized as a pivotal factor influencing exchange rate movements. Alshubiri et al [3] highlight the impact of interest rate changes on exchange rates, emphasizing the intricate relationship between these two economic variables. The rationale behind this association lies in the fact that interest rate differentials affect capital flows and investment attractiveness, thereby influencing the demand for a currency and, consequently, its exchange rate.…”

Section: Real Exchange Rate Fluctuations and Trade Balancementioning

confidence: 99%

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Influence Analysis of Real Exchange Rate Fluctuations on Trade Balance Data Using Feature Important Evaluation Methods

Kim,

2024

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This study delves into the intricate relationship between fluctuations in the real exchange rate and the trade balance, situated within the framework of a ‘two-country’ trade theory model. Despite a wealth of prior research on the impact of exchange rates on international trade, the precise extent of this influence remains a contentious issue. To bridge this gap, our research adopts a pioneering approach, employing three distinct artificial intelligence-based influence measurement methods: Mean Decrease Impurity (MDI), Permutation Importance Measurement (PIM), and Shapley Additive Explanation (SHAP). These sophisticated techniques provide a nuanced and differentiated perspective, enabling specific and quantitative measurements of the real exchange rate’s impact on the trade balance. The outcomes derived from the application of these innovative methods shed light on the substantial contribution of the real exchange rate to the trade balance. Notably, the real exchange rate (RER) emerges as the second most influential factor within the ‘two-country’ trade model. This empirical evidence, drawn from a panel dataset of 78 nations over the period 1992–2021, addresses crucial gaps in the existing literature, offering a finer-grained understanding of how real exchange rates shape international trade dynamics. Importantly, our study implies that policymakers should recognize the pivotal role of the real exchange rate as a key determinant of trade flow.

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“…Financial savings in turn promotes investment through the capital market. (Alshubiri, 2022) market forces has been worked to determine the real interest rate.It implies that the rate of interest positively impacts the cumulative investment. (Gillma & Kejak, 2009) argued that inflation decreases both the investment rate and output growth.…”

Section: Introductionmentioning

confidence: 99%

Convergence of Investment Leads by the Real Rate of Interest: An Empirical Evidence in the Indian Economy

Kumar

Sharma

Kumar

2023

Asian J. Interdicip. Res.

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This paper examines the impact of real rate of interest in the determination of investment. The policymaking to pave the way of growth is required to determine the effective rate of interest. Nominal interest rate does not depict the real phenomena of an economy. To capture the real phenomena of Indian economy, quarterly series of GDP deflator, the Nominal Rate of Interest, and Gross Fixed Capital Formation used as a proxy of investment have been used at the base year 2011-12. Real rate of interest is the subtraction of inflation from nominal rate of interest. The investment gap ratio is the difference between actual investment and the time trend value of the investment. The trend value of the investment is obtained by linear time. Standard methods have used to test the robustness of the Aggregate Supply equation by applying Augmented Dickey-Fuller and Phillips-Parron tests to avoid spurious regression. Granger Causality test is also employed to confirm the causal relationship between investment and inflation, and investment and the real rate of interest. The analysis concluded that the real rate of interest plays an important role to induce the investment to achieve desired growth of an economy.

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The Impact of the Real Interest Rate, the Exchange Rate and Political Stability on Foreign Direct Investment Inflows: A Comparative Analysis of G7 and GCC Countries

Cited by 18 publications

References 88 publications

A TVP-VAR assessment of the spillover effects of geopolitical risk shocks on macroeconomic variability: a study of the Ghanaian economy

A TVP-VAR assessment of the spillover effects of geopolitical risk shocks on macroeconomic variability: a study of the Ghanaian economy

Influence Analysis of Real Exchange Rate Fluctuations on Trade Balance Data Using Feature Important Evaluation Methods

Convergence of Investment Leads by the Real Rate of Interest: An Empirical Evidence in the Indian Economy

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