Showing papers in "Journal of economics and international finance in 2011"

Macroeconomic factors and stock returns: Evidence from Taiwan

Abstract: Increasing attention is being paid to the relationship between share prices and the macroeconomic variables by both economists and finance specialists. In the present-day scenario, where there is an increasing integration of the financial markets and implementation of various stock market reforms, the activities in the stock markets and their relationships with the macro economy have assumed significant importance. Economic agents use information in forming their expectations of future returns from holding stock securities. This study is an attempt to examine for Taiwan the casual relationship between index returns and certain crucial macroeconomic variable namely employment rate, exchange rate, GDP, Inflation and money supply. The analysis is based on stock portfolios rather than single stocks. In portfolio construction, four criteria are used: Market capitalization, price/earnings ratio (P/E ratio), PBR and yield. The purpose was to make a finer point with respect to the relationship between economic growth and stock market especially in terms of stock prices. Empirical findings revealed that exchange rate and GDP seem to affect returns of all portfolios, while inflation rate, exchange rate, and money supply were having negative relationship with returns for portfolios of big and medium companies.

Trade openness, foreign aid and economic growth in post-liberalisation Ghana: An application of ARDL bounds test

Abstract: The extent to which trade openness and foreign aid impacts on economic growth, has for years been an issue of global debate. Being one of the forerunners to adopt liberalisation policies in sub-Saharan Africa, Ghana’s post-liberalisation economic growth performance has received commendations from international institutions. This has increased government commitment in recent years to open the economy to international competition. Moreover, foreign aid inflow over the period has been relatively large. This paper employs the ARDL bounds testing approach to cointegration, to investigate the extent to which trade openness and the inflow of foreign aid, impact on economic growth in post-liberalisation Ghana. The paper finds that this effect is positive and statistically significant in both the short-run and the long run, although reduced by their interaction. Key words: Trade openness, foreign aid, economic growth, Ghana, ARDL.

Corporate governance and firm performance in Pakistan: The case of Karachi Stock Exchange (KSE)-30

Abstract: This paper examine the relationship between four important corporate governance mechanisms (board size, board composition, CEO/chairman duality and audit committee) and two firm performance measures (return on equity, ROE, and profit margin, PM), for a sample of 30 Pakistani listed firms between 2008 and 2009 The results provide evidence of a positive significant relationship between ROE and PM and three corporate governance mechanisms (board size, board composition and audit committee) The implication of this is that, the board size should be limited to a sizeable limit and board must be a right mixture of executive and non-executive directors The study, however, could not provide a significant relationship between the two performance measures (ROE and PM) and CEO/Chairman duality These results are consistent with prior empirical studies

Causality analysis among electricity consumption, consumer expenditure, gross domestic product (GDP) and foreign direct investment (FDI): Case study of Malaysia

Abstract: The current paper attempts to examine the causal relationship between electricity consumption (EC), consumer price index (CPI), gross domestic product (GDP) and foreign direct investment (FDI). Time series data were used for these variables for 1971 to 2009 period. The vector error correction model (VECM) was employed to estimate the causal relationship between electricity consumption with respective independent variables. All variables were found to be co-integrated indicating the existence of long run relationship among them. Furthermore, the result for long run causality from electricity consumption to FDI, GDP growth and inflation was found to be significant. The results suggest that electricity consumption is an important element determining economic growth in Malaysia and a powerful tool in executing government policy for energy saving. Policy makers should be aware of the importance of stable electricity supply in order to achieve sustainable economic growth. Key words: Electricity consumption, unit root test, co-integration, vector error correction model, Malaysia.

Impact of government sectoral expenditure on economic growth

Abstract: The objective of this study is to investigate the growth effect of government expenditure on economic growth in Nigeria over the period of 1980 to 2008, with a particular focus on sectoral expenditures. This paper investigates the growth effects of government expenditure in Nigeria over the period of 1980 to 2008, with a particular focus on sectoral expenditures. Five key sectors were chosen (security, health, education, transportation and communication and agriculture). Security as indicated by protection function of a nation consists of the creation of the rule of law and enforcement of property rights, life and property from external aggression health and education enhances the efficiency of labour which will increase the growth of national production. Also, expenditure on infrastructure such as transportation and communications enhances efficient production, by minimizing the cost of production. This will encourage more private investment, which increases the chance of firms to make more profit and hence fostering economic growth. The variables were tested for stationarity and cointegration analysis was also carried out using the Johansen co-integration technique. Error-correction test was also performed. The essence of the use of the techniques is to identify the interactions between government spending on these sectors (education, health national security, transportation and communication and agriculture) and economic growth in Nigeria. The result shows that in the short-run, expenditure on agriculture was found to be negatively related to economic growth. The impact of education, though also negative was not significant. The impact of expenditure on health was found to be positively related to economic growth. Though expenditures on national security transportation and communication were positively related to economic growth, the impacts were not statistically significant. It is possible that in the long-run, expenditure on education could be positive if brain drain could be checked. Key words: Government expenditure, economic growth, error correction, sectoral spending co-integration, Nigeria.

An empirical analysis of remittances-growth nexus in Pakistan using bounds testing approach

Abstract: This paper empirically examines the impact of remittances, exports, money supply (a broad measure for financial development) on economic growth in the context of Pakistan using bounds testing approach. Data set from 1976-2009 have been used for time series analysis. The result shows that remittances inflow and the lag effect of real output () are significant in short run and long run. Remittances have a positive impact on economic growth of Pakistan in both the long run and short run. The short-run effect of remittances and exports are significant and contributing to about 0.034 and 0.078% to economic growth. However, money supply was found insignificant to contribute to growth. The low coefficient of error correction model implies a slow speed of adjustment after a shock from previous year, that is, approximately 29.0% of disequilibria from the previous year’s shock converge back to the long-run equilibrium in the current year. The results presented in this study reinforce the importance to government, academic, and policy makers. Key words: Remittances, growth, financial sector, bound test, Pakistan

Has Education (Human Capital) Contributed to the Economic Growth of Nigeria

Abstract: Education, generally believed, contributes to the growth of an economy through acquisition of training and skills. For over 160 years, Nigeria had embarked on implementation of education policies affecting primary school, secondary school and tertiary institutions. This study used an econometric model to examine the contributions of primary education, secondary education and tertiary education to economic growth of Nigeria. These variables were proxied by school enrolments at various levels. Other variables included physical capital formation, health measured through total expenditure on health. In all primary school input, physical capital formation and health were found to contribute to growth. Secondary school input and tertiary institutions were found to dampen growth. Among others, this paper recommends that there should be adjustment in admission process in favour of core science and technical oriented course. The paper also recommends that schools should be adequately funded. Key words: Education, econometric model, economic growth, Nigeria.

Financial development and economic growth in Cameroon, 1970-2005

Abstract: In this work we investigated the relationship between financial development and economic growth in Cameroon using time series data for the period 1970-2005. Using the Johansen method of cointegration analysis and various measures of financial development, we find that financial development has a positive effect on economic growth in the long run through efficient collection and allocation of financial resources. Also, we find a long term causality relationship running from financial development to economic growth. We therefore propose that the ongoing financial reforms in the country should be pushed forward so as to boost the development of this sector and by that increase its role in economic development. Key words: Financial development, economic growth, Cameroon.

Analyzing the effect of macroeconomic variables on stock market returns: Evidence from Ghana

Abstract: This study investigates the relationship between macroeconomic variables and stock market returns using monthly data that spans from January 1992 to December 2008. Macroeconomic variables used in this study are consumer price index (as a proxy for inflation), crude oil price, exchange rate and 91 day Treasury bill rate (as a proxy for interest rate). The ordinary least square estimation (OLS) model in the context of the Box-Jenkins time series methodology was used in establishing the relationship between macroeconomic variables and stock market returns. Empirical findings reveal that there is a significant relationship between stock market returns and consumer price index (inflation). On the other hand, crude oil prices, exchange rate and Treasury bill rate do not appear to have any significant effect on stock returns. The results may provide some insight to corporate managers, investors and policy makers. Key words: Stock market returns, inflation, crude oil price, exchange rate, interest rate, Ghana.

Impact of VAT on economic development of emerging nations

Abstract: This paper on the impact of value added tax (VAT) on economic and human developments of emerging Nations from 2001 to 2009 as VAT is becoming important source of revenue. Our scope of study centers on Adamawa State of Nigeria. Data were collected from both primary and secondary sources. Regression, discriminant analysis and ANOVA were used in testing the hypotheses. We found out that VAT allocations alone accounts for 91.2% of the variations in expenditure pattern of Adamawa State from and that VAT allocations to the State within the said periods were very significant. The facts obtained via secondary data attest to a very significant VAT impact on economic and human development of the State from 2001 to 2009 but data obtained from primary sources suggest minimum VAT impacts. We recommend for further research to be carried out on the spread of VAT impact on various aspects of economic and human developments among the administrative areas and that the governance of Adamawa State and other States of developing countries to ensure that revenue allocations especially VAT should not only have impact but should be perceived to impact positively on the economic and human developments by the citizens of that state. Key words: Value added tax (VAT), economic and human development, emerging nations.

External debt and economic growth in Iran

Abstract: In this paper, balance relation and the long term of five variables (gross domestic product, private investment, public investment, external debt and imports) and also their influences on each other in Iran for the period of 1974 to 2007, were analyzed. As such, the vector autoregressive model (var) was used. First, stability of variables by the use of dickey-fuller test was examined, after which analysis of Johnson test for considering the convergence among five variables was used. The results of this research showed that the external debt had a negative effect on gross domestic product and private investment. Also, public investment had a positive relation with private investment. Key words: External debt, private investment, government investment, growth economy, vector autoregressive model (VAR).

Fiscal policy: Its impact on economic growth in Nigeria 1970 to 2006

Abstract: This study involves comparative analysis of the impact of fiscal policy on economic growth in Nigeria during regulation and deregulation periods. Econometric analysis of time series data from Central Bank of Nigeria was conducted. Results obtained showed that there is a difference in the effectiveness of fiscal policy in stimulating economic growth during and after regulation periods. The impact was marginally higher (only N140 million or 14% contribution to GDP) during deregulation, than in the regulation period. We recommend appropriate policy mix, prudent public spending, setting of achievable fiscal policy targets and diversification of the nation’s economic base, among others. Key words: Fiscal policy, regulation, deregulation, economic growth.

Training, manpower development and job performance: Perception and relevance among civil servants in Ebonyi State, Nigeria

Abstract: The paper examined perception and relevance of influence of training and manpower development on employee performance, using civil servants in Ebonyi State, Nigeria as reference. A pre-coded questionnaire was administered on 300 civil servants stratified into three categories: GL 04-06; GL 07-12 and GL 13+. The purpose was to ensure equitable representation of civil servants in the study area and to elicit their opinion on the theme of study. Using chi-square (x2) as a significant test, training was perceived to influence job performance at µ 0.05 and = µ 0.25. Also manpower development was perceived to influence job performance at µ 0.05 and = µ 0.25, but the influence of type of training on job performance was inconclusive. When cross-tabulated, only 49.8% of those that had training and those exposed to manpower development had high job performance as against 21.2% for their counterparts with no training and manpower development. This is suggestive of spurious factors (that may include leadership, organizational climate, management development, salary etc) that may intervene as motivation factors for high job performance. Of significance, is that the primary aim of training and manpower development was rather to meet statutory requirements (60%), as against improvement on the job (31.2%) and has policy implications for training and manpower development relevant to organizational need or goal to be provided to employees. This was a sufficiently promising result to encourage further study, not only to re-visit the theoretical explanation that training and manpower development directly result to improved job performance, but also to verify the circumstance within which training and manpower development enhance job performance. Key words: Training, manpower development, performance, employee, Ebonyi, civil servants.

Information technology and customer relationship management (CRM) in some selected insurance firms in Nigeria

Abstract: In this study, we explore the question of how IT could enhance firm performance in the areas of customer’s service and organization’s profitability in the Nigerian insurance industry. To draw our sample size of 90, 30 insurance companies were randomly selected from the 49-member insurance umbrella body, the Nigerian Insurers Association. Each company received 3 copies of the questionnaire meant for the IT manager, marketing manager and underwriting manager, respectively, making a total of 90. We proposed 3 hypotheses which were tested with the aid of Komolgorov-Smirnov test. Our findings show that while most companies have a comprehensive data base of their customers, not all make provisions for their customers to make major transactions online because they have not fully integrated their customer relationship management with information technology. We also find out that effective combination of customer relationship management with information technology leads to improved customer service and organization’s profitability. Key words: Information technology, customer relationship management (CRM), firm performance, insurance.

An econometric analysis of money demand function in Sudan, 1960 to 2010

Abstract: This study is an attempt to test the existence of a stable money demand function in Sudan during the period, 1960 to 2010. The money demand function includes real money balances, real GDP (as scale variable), the rate of inflation and exchange rate (as opportunity cost of holding money balances variables). The study applies cointegration and error correction models to examine the behavior of money demand during the period of analysis, all included variables have been expressed in logarithmic form (with the exception of inflation rate). Based on time series data (annually observations), cointegration results reveal that there is a long-run relationship between real money balances and the explanatory variables. In this long-run relationship, the estimated coefficients are consistent with the economic theory behind the demand for money. Error correction model (ECM) has been used to estimate the short-run money demand function, in which the estimated coefficients are also consistent with the economic theory and generally weaker in magnitude than those related to the long-run equilibrium. In this study, after incorporating the stability tests, the empirical results show that the money demand function is stable between 1960 and 2010. The study concludes that it is possible to use the narrow money aggregate as target of monetary policy in Sudan. Key words: Money demand, cointegration, error correction, stability, Sudan.

The investigation of the current status of socially responsible investment indices

Abstract: This paper investigated the development of the current status of socially responsible investment indices and their composition features, and it was found that the socially responsible investment indices were highly developed since the 2006 period. The socially responsible investment indices mostly used in European markets are becoming a trademark in many countries. Meanwhile, this paper listed some assessment criteria covering environment, social, governance and other fields. Different indices made use of the different assessment methods. This paper summarized these assessment methods and divided them into five kinds, after which it introduced their advantages and disadvantages. Key words: Socially responsible investment, index, method, criteria.

Analysis of risk among agribusiness enterprises investment in Abia State, Nigeria

Abstract: The study analysed risk among agribusiness enterprises investment in Abia State of Nigeria. Specifically, it examined types of risk and the degree of influence on the agribusiness enterprises. The study also examined common risk reducing strategies among the agribusiness enterprises in the area. Primary data collected from 40 formal agribusiness firms were used in the study. The data were analysed with w-statistics and validated with Pearson criterion (χ2). The result indicated a w-statistics of 0.79. The result was verified by Pearson criterion and this gave χ2 calculated value of 4.81 which is lower than table value of 11.07 at 5% significant level. The result revealed that risk sources affecting agribusiness investment were financial, marketing, currency and production in that order. The common risk reducing strategies were diversification, integration, forward contracting, and insurance, among others. Based on this, it was recommended that government should make policies that will encourage investors adopt the highlighted risk reducing strategies in risk management. Key word: Analysis, agribusiness, investment, Abia State, Nigeria.

Effective risk management and company's performance: Investment in innovations and intellectual capital using behavioral and practical approach

Abstract: Risk management is used to decrease the undesirable effects of market conditions and behavior on company’s activities and performance. This research focuses on ability of risk management response to out of control market factors to facilitate consistent profitability that leads to improvement in company’s performance. This is an empirical research that investigates the association of total risk management and company’s performance. The results indicate positive and significant relationship between total risk management and company’s performance in companies that have invested in research, development and innovations along with companies that have greater level of intellectual capital and industries that have rapid knowledge growth. The results confirm the findings of previous researches in terms of functional and practical behaviors approaches.

Nature and association of public and private investment: Public policy implications for South Africa

Abstract: South Africa has a low investment-to-GDP ratio compared to other developing countries. The share of government investment in the total investment has also been declining. In this context, the paper uses quarterly data from 1960 to 2005 to analyse the nature and relationship between public and private investment in South Africa. The findings of the study have strong policy implications and indicate that although public investment is not “crowding in/out” private investment, it exerts an indirect impact on private investment through the accelerator effect. Hence an increase in government spending on infrastructure and social sectors is likely to enhance private investment in the country. Therefore a more proactive fiscal policy is suggested to increase the investment-GDP ratio which can stimulate higher growth rates. Key words: Crowding in/out, public investment, infrastructure.

Lead - lag relationship between the futures and spot prices

Abstract: This paper examined the relationship between the futures market and spot market for the lean hogs and pork bellies markets during the sample period January 2001 through May 2010 and quantifies the price discovery function of commodity futures prices in relation to spot prices of the sample markets. The econometric tools like Unit root tests and Pairwise Granger Causality tests were employed in the study. The Augmented Dickey Fuller tests and Phillips-Perron tests employed in the study proved that both the selected markets were stationary series and the Granger Causality test proved bi-causality relationships among these markets. Hence, it was concluded that the profitable arbitrage does not exist in both of these markets and they are said to be in perfect equilibrium. Key words: Price discovery, causality, lean hogs and pork bellies

Does devaluation improve the trade balance of Nigeria? (A test of the Marshall-Lerner condition)

Abstract: This paper aims to investigate the effect of devaluation/depreciation of the Nigerian naira on the country’s trade balance for the period 1986 to 2008. The paper adopts the elasticity approach to the balance of payments adjustment. The study investigates the effect of exchange rate devaluation as a policy on the Nigerian economy’s Trade for the period 1986 to 2008. The focus is to test for the Marshal-Lerner condition of the power of exchange rate devaluation as a stabilization policy of a particular country. The study adapted the elasticity approach of the Marshall-Lerner condition to the balance of payment adjustment mechanism. The ordinary least square (OLS) method was used to estimate the import and export demand functions. The empirical results shows that devaluation/depreciation does not improve the trade balance;since the sum of demand elasticities for imports and exports is less than unity, the Marshall-Lerner condition do not hold. This paper concluded that devaluation/depreciation cannot improve the trade balance in the Nigerian economy. Devaluation/depreciation can only benefit countries that are originally export based before the devaluation/depreciation of a currency. Economies that are import dependent can hardy benefit from the devaluation/depreciation of its currency. Nigeria is a typical example of a 90% dependent on imported raw materials into the production process. For an economy that is structured like that of Nigeria, devaluation/depreciation will surely complicate the problem on hand, rather than solving it. Key words: Devaluation, trade balance, Marshall-Lerner condition, co-integration, Nigeria.

Technical efficiency of maize production in Oyo state

Abstract: Using a cross sectional data obtained through a multistage sampling technique this study estimates the technical efficiency of maize producing-farmers in Oyo State, Nigeria and further examined the factors that determines the differential in efficiency index. A multistage sampling technique was used to select 120 maize farmers in the study area. Data were collected and subjected to inferential statistics; stochastic frontier production model was used in the analysis to determine the relationship between the maize output and the level of input used in the study area. The empirical results revealed that farm size and Seed were statistically significant at 10 and 1% level respectively in the study area. The estimated gamma parameter (i§) of 0.12 in the study area, indicates that 12% of the total variation in maize output is due to the technical inefficiencies. The mean technical efficiency (χ) was 0.961 while the return to scale (RTS) was 0.587 in the study, it was therefore concluded that there is scope for increasing maize production by 0.39% with the present technology. Therefore the study confirmed that more land can still be open for maize production in the area with the current level of input used. Key words: Technical efficiency, maize production, Oyo State, stochastic production frontier.

Effectiveness of foreign aid in sub-Saharan Africa: Does disaggregating aid into bilateral and multilateral components make a difference?

Abstract: Inspired by the contradicting findings of studies on aid effectiveness and the recently emerging dissatisfaction of scholars with the methodologies of earlier works, this study took up the examination of the effectiveness of bilateral and multilateral aids on economic growth. To this end, the study applied the estimation technique of system-GMM (system - generalized method of moments) to panel data of 42 Sub-Saharan African countries collected from secondary sources for the years 1980 through 2007. For the data at hand, there was no evidence for the (conditional or unconditional) effectiveness of both kinds of aid. This result was robust to the use of alternative growth models. Bilateral aid on its own, or in interaction with policy, is ineffective at enhancing economic growth, regardless of whether one measures it relative to the recipients' gross domestic product or in per capita terms. The same holds for multilateral aid. This conclusion confines itself to the data at hand and thus gives no evidence about the effectiveness of the recently emerging aid modalities, which are argued to possess elements of better government accountability, better transparency and better recipient-ownership.

An evaluation of exchange rate models by carry trade

Abstract: We evaluate the effectiveness of economic fundamentals in enhancing profit of carry trades. We simulate carry trades in Japanese yen and Swiss franc against six target currencies based on forecasts of exchange rate models of economic fundamentals. The performance results are compared against those of the benchmark random walk and AR (1) models. We find that carry trades perform better in risk-adjusted returns and produce less downside risk in the exchange rate models of economic fundamentals. Particularly, the best improvement in profit to carry trades comes when the economic fundamentals are used in a factor-augmented regression framework where the factor is time-varying and derived from the fundamentals. The result is robust for different time periods and after controlling for transaction costs. Key words: Exchange rate models, Japanese yen and Swiss franc, carry trade, currency risk premium.

Validation Panzar-Rosse Model in determining the structural characteristics of Tunisian banking industry

Abstract: This paper investigates the market structure of banking industry in Tunisia and evaluates the degree of competition. The current analysis employs a widely used non-structural methodology put forward by Panzar and Rosse (1987), the so-called H-statistic, and draws upon a comprehensive panel dataset of Tunisian banks covering the period 1999 to 2008. The estimated H statistics for the whole sample periods are positive (0.67 and 0.71) and the Wald test for the market structure of monopoly or perfect competition is rejected, implying that the banks in Tunisia earned their revenue in the condition of monopolistic competition. Key words: Market structure, competition, concentration, Panzar and Rosse methodology.

The determinants of the demand for money in developed and developing countries

Abstract: This study examined the determinants of the demand for money in developing and the developed countries. The study employed a comparative analysis of the effectiveness of the determinants of the demand for money in both developing and developed countries. It was found out that income related factors or the scale variables are more effective in the developing countries while factors that work through the financial system are more effective in the developed economies and that stock market variables should not be ignored in modeling demand for money even in emerging economies since they constitute an alternative to holding cash. The level of the development of a country’s financial system determines which factors will be relevant targets in moping excess liquidity within an economy. Key words: Demand for money, comparative analysis, excess liquidity.

An analysis of real estate consumers' perception of service quality in estate agency practice in Lagos metropolis, Nigeria

Abstract: The role of real estate consumers in estate agency practice cannot be over-emphasized. They are involved in service production and affect the overall service delivery. This study provides an analysis of the real estate consumers’ perception of service quality in Lagos metropolis, Nigeria for the purpose of creating better consumers’ satisfaction and improving service quality in the real estate agency market. The data collection instrument adopted for this study was self-administered questionnaires. A survey of 203 real estate consumers revealed what real estate consumers actually value in real estate agency service delivery but are lacking on the part of real estate agents. Findings indicated five key components to consumers’ satisfaction in real estate agency in the study area. These components are: “courtesy”, “provided service as promised”, “frequent communications”, “exact time services would be performed” and “personal attention”. These components contribute to consumers’ satisfaction and the ability to attract repeat businesses in real estate agency in Lagos metropolis. Key words: real estate consumers, real estate agents, consumers’ satisfaction, consumers’ perception, service quality, Lagos metropolis.

The impact of insurance contributions on economic growth in Nigeria

Abstract: In the last decade, most studies on the interaction between the financial sector and economic growth has focused mainly on the banks and the stock market. Recently, growing attention has shifted to the interaction between the non-bank financial intermediaries (NBFIs) such as the insurance companies and economic growth. In this study, we examined the impact of insurance contributions on economic growth in Nigeria over a twenty seven year period, between 1981 and 2008 using a dynamic factor model. The proposed technique described a number of methods designed to analyze a functional relationship between the volume of insurance contribution and economic growth in terms of underlying but unobservable random quantities called factors. The factor loadings indicate which common trend is related to which set of time series. The result obtained through this approach shows that the functional relationship between the volume of insurance contribution and economic growth in Nigeria is a first order vector autoregressive model. Key words: Insurance contribution, dynamic factor model, economic growth.

ARIMA (autoregressive integrated moving average) approach to predicting inflation in Ghana

Abstract: Inflation is defined as an increase in the general price level of goods and services within a period of time. For any economic agent to formulate a policy, it must take into consideration inflation and the aim of this study is to use autoregressive integrated moving average (ARIMA) model to predict inflation in Ghana. In order to fulfil this objective, monthly inflation figures were collected from Ghana Statistical Service covering the period 2000:6 to 2010:12 to build the ARIMA model. In building the ARIMA model, the Box- Jenkins approach has been used, thus inflation was found to integrated of order one and follows (6,1,6) order. Inflation was predicted highest for the months of March, April and May to be 8.95, 10.07 and 10.24% respectively. The root mean squared error (RMSE) was calculated at 0.115453, indicating the efficiency of predictability of the model built to predict inflation. It was therefore recommended that the appropriate measures must be put in place to prevent inflation spiral from setting in motion. This is so because our model suggests that, inflation has a long memory and that once the inflation spiral is set in motion, it will take at least 12 periods (months) to bring it to a stable state. Key words: AR, MA, autoregressive integrated moving average (ARIMA), Inflation.

Foreign direct investment and export growth in Nigeria

Abstract: The purpose of this study was to examine the link between Foreign Direct Investment (FDI) in Nigeria from 1970 to 2008. The stationary properties of the data and the order of integration of the data were tested using the augmented Dickey fuller (ADF) and the Philip – Perron (PP) tests. The cointegration results showed at least one cointegrating equation in the export function. The Granger – causality results suggest unidirectional causality running from (i) foreign direct investment to export; (ii) real exchange rate to export; (iii) trade balance to export and bidirectional causality from external market indicator to export. The study suggests that more policies should be channeled towards improving export oriented foreign direct investment and at the same time, efforts should be geared towards improving basic infrastructure which will not only lower production costs but improve upon the competitiveness of the economy which will invariably attract more foreign direct investment into the economy. Key words: Foreign direct investment, exports, causality cointegration, error correction, augmented Dickey fuller.