Symmetric and Asymmetric Effects of Financial Innovation and FDI on Exchange Rate Volatility: Evidence from South Asian Countries |
QAMRUZZAMAN, Md.
(School of Business and Economics, United International University)
MEHTA, Ahmed Muneeb (Hailey College of Banking and Finance, University of the Punjab) KHALID, Rimsha (Department of Business and Management, Limkokwing University of Creative Technology) SERFRAZ, Ayesha (Institute of Administrative Sciences, University of the Punjab) SALEEM, Hina (Institute of Business and Information Technology, University of the Punjab) |
1 | Abdoh, W., Yusuf, N. H. M., Zulkifli, S. A. M., Bulot, N., & Ibrahim, N. J. (2016). Macroeconomic factors that influence exchange rate fluctuation in ASEAN countries. International Academic Research Journal of Social Science, 2(1), 89-94. |
2 | Abdul Majeed, M. M. (2019). Contribution of Tourism and Foreign Direct Investment to Gross Domestic Product: Econometric Analysis in the Case of Sri Lanka. The Journal of Asian Finance, Economics and Business, 6(4), 109-114. DOI |
3 | Abel, A. B. (1983). Optimal investment under uncertainty. The American Economic Review, 73(1), 228-233. |
4 | Adams Jr, R. H. (2006). Migration, remittances and development: The critical nexus in the Middle East and North Africa. Paper presented at the United Nations Expert Group Meeting on International Migration and Development in the Arab Region, Beirut. |
5 | Aftab, M., Syed, K. B. S., & Katper, N. A. (2017). Exchange-rate volatility and Malaysian-Thai bilateral industry trade flows. Journal of Economic Studies, 44(1), 99-114. DOI |
6 | Aghion, P., Bacchetta, P., Ranciere, R., & Rogoff, K. (2009). Exchange rate volatility and productivity growth: The role of financial development. Journal of Monetary Economics, 56(4), 494-513. DOI |
7 | Aigheyisi, O., & Oaikhenan, H. (2015). Investment, government expenditure and unemployment in Nigeria. Paper presented at the A Paper Presented At the Annual Conference of the Nigerian Economic Society (NES). Abuja, Nigeria. |
8 | Ajao, M. G. (2015). The determinants of real exchange rate volatility in Nigeria. Ethiopian Journal of Economics, 24(2), 43-62. |
9 | Akhtar, M. A., & Hilton, R. S. (1984). Exchange rate uncertainty and international trade: Some conceptual issues and new estimates for Germany and the United States. Federal Reserve Bank. |
10 | Ansong, A., Marfo-Yiadom, E., & Ekow-Asmah, E. (2011). The Effects of Financial Innovation on Financial Savings: Evidence From an Economy in Transition. Journal of African Business, 12(1), 93-113. doi:10.1080/15228916.2011.555271 DOI |
11 | Bahmani‐Oskooee, M., & Hegerty, S. W. (2007). Exchange rate volatility and trade flows: a review article. Journal of Economic Studies, 34(3), 211-255. https://doi.org/10.1108/01443580710772777 DOI |
12 | Benassy-Quere, A., Fontagne, L., & Lahreche-Revil, A. (2001). Exchange-rate strategies in the competition for attracting foreign direct investment. Journal of the Japanese and International economies, 15(2), 178-198. DOI |
13 | Banerjee, A., Dolado, J., & Mestre, R. (1998). Error‐correction mechanism tests for cointegration in a single‐equation framework. Journal of Time Series Analysis, 19(3), 267-283. DOI |
14 | Bara, A., & Mudxingiri, C. (2016). Financial innovation and economic growth: evidence from Zimbabwe. Investment Management and Financial Innovations, 13(2), 65-75. DOI |
15 | Bari, B., & Togba, E. D. (2017). The Effect of Foreign Exchange and Real Exchange Rate on Foreign Trade in Liberia: An Application of Autoregressive Distributed Lag (ARDL) Approach. EconWorld 2017 Paris Proceedings, 1-23. |
16 | Bernanke, B. S. (1983). Irreversibility, uncertainty, and cyclical investment. The Quarterly Journal of Economics, 98(1), 85-106. DOI |
17 | Bleaney, M. (1992). Comparisons of real exchange rate volatility across exchange rate systems. Oxford Bulletin of Economics and Statistics, 54(4), 557-565. DOI |
18 | Capolupo, R., & Jonung, L. (2008). The effects of the real exchange rate volatility and misalignments on foreign trade flows in Uzbekistan. SSRN Electronic Journal. DOI: 10.2139/ssrn.1726684 DOI |
19 | Chaouachi, M., & Slim, C. (2020). Current Covid-19 Impact On Saudi Stock Market: Evidence From An ARDL Model. Available at SSRN 3636333. |
20 | Choudhry, T. (2005). Exchange rate volatility and the United States exports: evidence from Canada and Japan. Journal of the Japanese and International Economies, 19(1), 51-71. DOI |
21 | Dal Bianco, S., & Loan, N. C. T. (2017). FDI inflows, price and exchange rate volatility: New empirical evidence from Latin America. International Journal of Financial Studies, 5(1), 6. DOI |
22 | Crowley, P., & Lee, J. (2003). Exchange rate volatility and foreign investment: International evidence. The International Trade Journal, 17(3), 227-252. DOI |
23 | Cushman, D. O. (1985). Real exchange rate risk, expectations, and the level of direct investment. The Review of Economics and Statistics, 297-308. |
24 | Cushman, D. O. (1988). Exchange-rate uncertainty and foreign direct investment in the United States. Weltwirtschaftliches Archiv, 124(2), 322-336. DOI |
25 | Damani, A., & Vora, V. (2018). An Empirical and Analytical Study of the Factors Affecting the Exchange Rate Fluctuation in India. International Journal of Innovative Studies in Sociology and Humanities, 3(3), 1-14. |
26 | Danmola, R. A. (2013). The impact of exchange rate volatility on the macro economic variables in Nigeria. European Scientific Journal, 9(7). |
27 | Darby, J., Hallett, A. H., Ireland, J., & Piscitelli, L. (1999). The impact of exchange rate uncertainty on the level of investment. The Economic Journal, 109(454), 55-67. DOI |
28 | De Carvalho, F. J. C. (1997). Financial innovation and the Post Keynesian approach to the "process of capital formation". Journal of Post Keynesian Economics, 19(3), 461-487. DOI |
29 | Dickey, D. A., & Fuller, W. A. (1979). Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Journal of the American Statistical Association, 74(366a), 427-431. doi:10.1080/01621459.1979.10482531 DOI |
30 | Foad, H. S. (2005). Exchange Rate Volatility and Export-Oriented FDI. Available at SSRN 706524. |
31 | Furceri, D., & Borelli, S. (2008). Foreign direct investments and exchange rate volatility in the EMU neighborhood countries. Journal of International and Global Economic Studies, 1(1), 42-59. |
32 | Gennaioli, N., Shleifer, A., & Vishny, R. (2012). Neglected risks, financial innovation, and financial fragility. Journal of Financial Economics, 104(3), 452-468. DOI |
33 | Ghatak, S., & Siddiki, J. U. (2001). The use of the ARDL approach in estimating virtual exchange rates in India. Journal of Applied Statistics, 28(5), 573-583. DOI |
34 | Giannellis, N., & Papadopoulos, A. P. (2011). What causes exchange rate volatility? Evidence from selected EMU members and candidates for EMU membership countries. Journal of International Money and Finance, 30(1), 39-61. DOI |
35 | Goldberg, L. S. (1993). Exchange rates and investment in United States industry. The Review of Economics and Statistics, 575-588. |
36 | Goldberg, L. S., & Klein, M. W. (1997). Foreign Direct Investment, Trade and Real Exchange Rate Linkages in Developing Countries. NBER Working Paper 6344. https://www.nber.org/papers/w6344 |
37 | Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: Journal of the Econometric Society, 251-276. |
38 | Goldberg, L. S., & Kolstad, C. D. (1994). Foreign direct investment, exchange rate variability and demand uncertainty. NBER Working PAper 4815. https://www.nber.org/papers/w4815 |
39 | Grossmann, A., Love, I., & Orlov, A. G. (2014). The dynamics of exchange rate volatility: A panel VAR approach. Journal of International Financial Markets, Institutions and Money, 33, 1-27. DOI |
40 | Hartman, R. (1972). The effects of price and cost uncertainty on investment. Journal of Economic Theory, 5(2), 258-266. DOI |
41 | Jamil, M., Streissler, E. W., & Kunst, R. M. (2012). Exchange rate volatility and its impact on industrial production, before and after the introduction of common currency in Europe. International Journal of Economics and Financial Issues, 2(2), 85. |
42 | Kemboi, I., & Kosgei, D. K. (2018). Economic Determinants of Exchange Rate Volatility in Kenya. African Journal of Education, Science and Technology, 4(4), 58-64. |
43 | Kenen, P. B., & Rodrik, D. (1986). Measuring and analyzing the effects of short-term volatility in real exchange rates. The Review of Economics and Statistics, 311-315. |
44 | Kibiy, J., & Nasieku, T. (2016). Determinants of exchange rate volatility of the Kenyan Shilling against world major currencies. International Journal of Social Sciences and Information Tehcnology, II, 1181-1202. |
45 | Kilicarslan, Z. (2018). Determinants of exchange rate volatility: empirical evidence for Turkey. Journal of Economics, Finance and Accounting, 5(2), 204-2013. |
46 | Kiprop, V. J., Ayuma, C., & Bokongo, J. (2016). Effect of Financial Innovation on the Growth of Commercial Banks in Eldoret Town, Uasin Ishu County. IOSR Journal of Business and Management, 18(9), 99-109. DOI |
47 | Kwiatkowski, D., Phillips, P., Schmidt, P., & Shin, Y. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root? Journal of Econometrics, 54(1-3), 159-178. DOI |
48 | Latief, R., & Lefen, L. (2018). The effect of exchange rate volatility on international trade and foreign direct investment (FDI) in developing countries along "one belt and one road". International Journal of Financial Studies, 6(4), 86. DOI |
49 | Mannah-Blankson, T., & Belnye, F. (2004). Financial innovation and the demand for money in Ghana. Accra: Bank of Ghana. |
50 | Lee, J.W., & Zhao, T. F. (2014). Dynamic Relationship between Stock Prices and Exchange Rates: Evidence from Chinese Stock Markets. Journal of Asian Finance, Economics and Business, 1(1), 5-14. https://doi.org/10.13106/jafeb.2014.vol1.no1.5. DOI |
51 | Merton, R. C. (1992). Financial Innovation and Economic Performance. Journal of Applied Corporate Finance, 4(4), 12v24. DOI |
52 | Michalopoulos, S., Laeven, L., & Levine, R. (2009). Financial innovation and endogenous growth. NBER Working Paper 15356. https://www.nber.org/papers/w15356 |
53 | Mirchandani, A. (2013). Analysis of macroeconomic determinants of exchange rate volatility in India. International Journal of Economics and Financial Issues, 3(1), 172. |
54 | Mishra, P. K. (2010). Financial Innovation and Economic Growth-A Theoretical Approach. Journal of Applied Corporate Finance, 15(1), 1-6. |
55 | Mugane, C. (2015). The Effect of Financial Innovations on the Financial Performance of Commercial Banks in Kenya. University of Nairobi, Kenya. |
56 | Mugo, J. G. (2009). The Effect of Financial Innovation on the Growth of Micro-Finance Institutions in Kenya. University of Nairobi, Kenya. (D61/73601/2009) |
57 | Mwinzi, D. M. (2014). The Effect of Finanical Innovation on Economic Growth in Kenya. University of Nairobi, Kenya. (D61/ 60882/2013) |
58 | Nagayasu, J. (2012). Financial innovation and regional money. Applied Economics, 44(35), 4617-4629. doi:10.1080/00036846.2011.593500 DOI |
59 | Napier, M. (2014). Real Money, New Frontiers: Case Studies of Financial Innovation in Africa. Financial Innovation Studies, 10(2), 1-10. |
60 | Nazir, M. I., Tan, Y., & Nazir, M. R. (2018). Financial Innovation and Economic Growth: Empirical Evidence from China, India and Pakistan. International Journal of Finance & Economics, 1-24. doi:10.1002/ijfe.2107 DOI |
61 | Norden, L., Silva Buston, C., & Wagner, W. (2014). Financial innovation and bank behavior: Evidence from credit markets. Journal of Economic Dynamics and Control, 43, 130-145. doi:10.1016/j.jedc.2014.01.015 DOI |
62 | Odularu, G. O., & Okunrinboye, O. A. (2008). Modeling the impact of financial innovation on the demand for money in Nigeria. African Journal of Business Management, 3(2), 39-51. |
63 | Osinubi, T. S., & Amaghionyeodiwe, L. A. (2009). Foreign direct investment and exchange rate volatility in Nigeria. International Journal of Applied Econometrics and Quantitative Studies, 6(2), 83-116. |
64 | Paul, B. P. (2014). Testing Export-Led Growth in Bangladesh: An ARDL Bounds Test Approach. International Journal of Trade, Economics and Finance, 5(1), 1-5. DOI |
65 | Pesaran, M. H., Shin, Y., & Smith, J. R. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometric, 16, 289-326. DOI |
66 | Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. doi:10.1002/jae.616 DOI |
67 | Phillips, P. C. B., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346. doi: https://doi.org/10.1093/biomet/75.2.335 DOI |
68 | Plosser, C. (2009). Financial Econometrics, Financial Innovation, and Financial Stability. Journal of Financial Econometrics, 7(1), 3-11. DOI |
69 | Qamruzzaman, M., & Jianguo, W. (2017). Financial innovation and economic growth in Bangladesh. Financial Innovation, 3(1), 19. doi:10.1186/s40854-017-0070-0 DOI |
70 | Qamruzzaman, M. (2017). Innovation and economic growth: evidence from financial institutional innovation. Risus-Journal On Innovation And Sustainability, 8(2), 126-141. DOI |
71 | Qamruzzaman, M., & Jianguo, W. (2018). Nexus between financial innovation and economic growth in South Asia: evidence from ARDL and nonlinear ARDL approaches. Financial Innovation, 4(1), 20. DOI |
72 | Qamruzzaman, M., & Karim, S. (2020). Nexus between Economic Voaltility, Trade Opennes and FDI: An Application of ARDL, NARDL and Asymmetric Causalty. Asian Economic and Financial Review, 10(7), 790-807. DOI |
73 | Qamruzzaman, M., Karim, S., & Wei, J. (2019). Does Asymmetric Relation Exist between Exchange Rate and Foreign Direct Investment in Bangladesh? Evidence from Nonlinear ARDL Analysis. Journal of Asian Finance, Economics and Business, 6(4), 115-128. https://doi.org/10.13106/jafeb.2019.vol6.no4.115 DOI |
74 | Qamruzzaman, M., & Wei, J. (2018). Financial Innovation, Stock Market Development, and Economic Growth: An Application of ARDL Model. International Journal of Financial Studies, 6(3), 69. DOI |
75 | Qamruzzaman, M., & Wei, J. (2019). Financial Innovation and Financial Inclusion Nexus in South Asian Countries: Evidence from Symmetric and Asymmetric Panel Investigation. International Journal of Financial Studies, 7(4), 61. DOI |
76 | Qin, J. (2000). Exchange rate risk and two-way foreign direct investment. International Journal of Finance & Economics, 5(3), 221-231. DOI |
77 | Serven, L. (2003). Real-exchange-rate uncertainty and private investment in LDCs. Review of Economics and Statistics, 85(1), 212-218. DOI |
78 | Rahmi, M., Azma, N., Muttaqin, A. A., Jazil, T., & Rahman, M. (2016). Risk Volatility Measurement: Evidence from Indonesian Stock Market. Journal of Asian Finance, Economics and Business, 3(3), 57-65. https://doi.org/10.13106/jafeb.2016.vol3.no3.57. DOI |
79 | Rashid, A., & Husain, F. (2013). Capital inflows, inflation, and the exchange rate volatility: an investigation for linear and nonlinear causal linkages. The Pakistan Development Review, 183-206. |
80 | Saheed, Z. S., & Ayodeji, S. (2012). Impact of capital flight on exchange rate and economic growth in Nigeria. International Journal of Humanities and Social Science, 2(13), 247-255. |
81 | Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. In: Festschrift in Honor of Peter Schmidt (pp. 281-314): Springer. |
82 | Solans, E. D. (2003). Financial innovation and monetary policy. Paper presented at the Excerpts of speech delivered at the 38th SEACEN Governors Conference and 22nd Meeting of the SEACEN Board of Governors on" Structural Change and Growth Prospects in Asia-Challenges to Central Banking", Manila (13 February 2003). |
83 | Toda, H. Y., & Yamamoto, T. (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66(1-2), 225-250. DOI |
84 | Tufano, P. (2003). Financial Innovation. In: The Handbook of the Economics of Finance (Vol. 1). North Holland. |
85 | Ullah Khan, U., Sultan, F., & Rehman, Z. U. (2017). An analysis of exchange rate volatility and FDI inflow in Pakistan; using ARDL bound testing technique (1981-2015). International Journal of Applied, 5(5), 1-9. |
86 | Zhaozhi, H. J. Z. (2010). The Impact of RMB Exchange Rate Volatility on FDI Inflow into China. Studies of International Finance, 5. |
87 | Urata, S., & Kawai, H. (2000). The determinants of the location of foreign direct investment by Japanese small and medium-sized enterprises. Small Business Economics, 15(2), 79-103. DOI |
![]() |