The dependent variable financial performance is measured as return on assets roa. The present study has attempted to identify the factors affecting the determination of exchange rate in bangladesh by taking into account the values of bdt in terms of us dollar. Besides, it will also discuss how those factors can impact the operations of players in the insurance industry. In view of these issues raised, the burgeoning research. With this among other factors, the business confidence in nigeria in the first quarter of the 2016 as reported by the central bank of nigeria has plummeted to 10. Exchange rate instability emerged as one of the controversial issues n developing. Factors affecting financial performance of firms listed on. These include a countrys fiscal policy, exchange rate regime as well the overall regulatory environment. Commerce, the negotiated exchange of goods and services has been in tradition for thousands of years, but due to the invention of internet, web technologies and other electronic devices, led to ecommerce. Critical factors affecting nigeria s foreign exchange flows. Nigeria is an open monoculture economy that is over dependent on crude oil. It is 1 foreign exchange rate1 1 contributors to this series are.
Studies on topical issues affecting the nigerian economy are published in order to communicate the results of empirical research. Increases in interest rates cause a countrys currency to appreciate because higher interest rates provide higher rates to lenders, thereby attracting more foreign capital, which causes a rise in exchange rates. How falling oil prices caused foreign exchange rate. Exchange rate fluctuation on nige ria economic growth is an important economy metric as it reflects underlying strength and competitiveness with world economies asinya and takon, 2014. What are the major fundamental factors that affect currency movements. Pdf the study tried to examine the effect of environmental forces on foreign exchange market in nigeria. Newspaper reports quoting efcc, give large figures of amounts past government officials have allegedly stolen. A few factors that have contributed to the distortion in the nigeria forex market are. This trend of insufficient supply of forex by the greenback in the nigeria foreign exchange market is adversely affecting businesses in nigeria who want to use or transfer us dollars abroad. The insurance industry is a major player in the economy and this implies economic imbalances can as well be felt in the sector.
This article will outline some of the key economic factors affecting insurance industry. The main objective of the study is to investigate which of the macroeconomic factors that influence exchange rate movement in selected asean countries and to determine the relationship of exchange rate between and export, interest rate, and inflation rate. An exchange rate or currency quotation is necessary to determine the proportions of currency volume in case of international trade in goods and services, cash flows, revaluation of accounts in foreign. Udoye 2009, which examined the determinants of exchange rate in nigeria for period of 1970 to 2006, using the nigeria time series data. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change. Macroeconomic factors, firm characteristics and financial. Exchange rate trends and export performance in nigeria munich. We begin with the social factors, which includes 1. Exchange rate movement in nigeria has been variable with periods of rapid depreciation of the. Foreign exchange inflow is made up of autonomous receipts, gifts and borrowed resources. For example, iceland debt problems in 2008, caused a rapid fall in the value of the icelandic currency. Macroeconomic factors that influence exchange rate.
Analysis if the factors affecting exchange rate variability in pakistan. Pdf analysis of the factors affecting exchange rate. If there are no restrictions imposed on trade by the countries the exchange. Hopper r eaders of the financial press are familiar with the gyrations of the currency market. Exchange rate fluctuation on nigeria economic growth is an important economy metric as it reflects underlying strength and competitiveness with world economies asinya and takon, 2014. No matter which way currencies zig or zag, it seems there is always an analyst with a quotable, ready explanation. According to kinggeorge 20, the effect of exchange rate fluctuations on the nigeria manufacturing sector was set to find out the effect of exchange rate on the nigeria manufacturing sector. Foreign exchange rate central bank of nigeria home. Factors that affects the nigeria naira and its foreign exchange rate. Judging from the endogeneity feature of the variables, a var and vecm frameworks were employed. Factors affecting foreign direct investment in pakistan prof. Nigeria is ranked as the 12 th and 8 th global largest producer and exporter of crude oil respectively with petroleum accounting for the largest chunk of the countrys. Specifically, the study investigates the effect of interest rate, inflation rate, exchange rate and the gross domestic product gdp growth rate, while the firm characteristics were size, leverage and.
In addition to her contemporary fiscal and monetary policies, the nigerian government had implemented various other policies aimed at curbing inflation in the country. Pdf impact of environmental factors on foreign exchange. Effect of exchange rate fluctuations on manufacturing sector. Some studies examine the sources of exchange rate volatility using a specic exchange rate level model, whilst others are based on a synthesis of exchange rate level models. The main economic factors affecting insurance industry the health of an economy is defined by various elements, which may encourage or hurt growth. Nigeria has suffered a shocking downturn in 2015 due to insufficient supply of foreign exchange occasioned among other factors by sharp decline in the global price of oil. In nigeria, corruption occurs in many areas but the most common is corruption of government officials. Nigeria is an open monoculture economy that is overdependent on crude oil. The dynamics of exchange rate in nigeria central bank of nigeria. Market rates or daytoday rates of exchange are, however, subject to fluctuations in response to the supply of and demand for international money transfers. These studies stress that monetary variables and nonmonetary factors are important in.
What are the factors that affect the exchange rate of a. Religion is very pronounced in nigeria and it is a very sensitive issue. The long run impact of oil prices on nigerias exchange rates are the subject of this study. What are the risks involved in currency futures market. Nonetheless, the current government administration seems to be fighting corruption and a lot of looted government funds are being recovered. Growth of production factors and productivity, 197097 text figures. Impact of exchange rate fluctuation on nige rias economic growth 19812015, full project materials. Exchange rate fluctuation on nigeria economic growth. Nigeria abandoned a fixed exchange rate regime in favour of floating exchange in 1986. These factors could lead the exchange rate to depreciate. Sixteen macroeconomic variables have been selected to test their impact.
Introduction in recent years forecasting of financial data such as interest rate, exchange rate, stock market and bankruptcy has been. To be delivered in a certain period of time in the future, but beforehand, the buyer and the seller will enter into a contract to reach an. The purpose of this paper is to explore the interrelationship between macroeconomic factors, firm characteristics and financial performance of quoted manufacturing firms in nigeria. Pdf analysis of the factors affecting exchange rate variability in. Pdf macroeconomic factors that influence exchange rate. What affects the nigeria money exchange rate ping express. Nairametrics readers and followers have sent us messages asking what we think will happen to the naira in 2018. Todays infographic comes to us from hiwayfx and it highlights six of the major factors that can impact currency exchange rates. Socioeconomic determinants of life expectancy in nigeria. They made the econometric analysis on the data of chinas fdi and factors like exchange rate, gdp, cpi, resident consumption level and total export during the period of 1983 to 2011. Effects of exchange rate fluctuations on economic growth. Factors influencing liquidity in emerging markets report of the iosco emerging markets committee december 2007. Macroeconomic factors that influence exchange rate fluctuation in asean countries.
This paper aims to investigate the factors affecting the real exchange rate in. In this research paper, our objective is the long run relationship between oil prices and exchange rates. Factors affecting currency exchange rate, economical. Factors which influence the exchange rate economics help. The article aims to study the relationship between those macroeconomic factors that the affect inrusd exchange rate er. The various theories of exchange rate determination, as we have seen, seek to explain only the equilibrium or normal long period exchange rates. In order to analyze the factors that affect the exchange rate movement, a multiple regression analysis has been used that explains the effect of one variable on the other and its significance. Currency exchange rate, forex, factors affecting currency, prediction models, purchasing power parity, artificial neural network based prediction models 1. In surveying theoretical models of exchange rate determination, therefore, it is appropriate to examine the empirical regularities that have been characteris tic of the behavior of exchange rates and other related variables under float ing exchange rate regimes. In finance, an exchange rate is the rate at which one currency will be exchanged for another.
Modification of this equilibrium model by the introduction of. The effect of exchange rate fluctuations on economic growth varies in different countries. Pdf the paper examinesanalyzed the factors contributing. The purpose of this study is to know the factors affecting the adoption of ecommerce in nigeria. The exchange rate is the price of one currency in terms of another currency, that is, the current market price for which one national currency can be exchanged for another. This study articulates main factors that affected foreign exchange flows in nigeria between 1987 and 1997. Changes in interest rate affect currency value and dollar exchange rate.
Feb 07, 2015 attainment of 70 years life expectancy by 2020 is one of the millennium development goals in nigeria. The three main factors which affect the exchange rate are as follows. It is also regarded as the value of one countrys currency in relation to another currency. The main objective of this selection is to study and measure the strength and the weakness of the financial performance and the internal factors affecting this performance of these companies, as well as discover the extent of the application of. Attainment of 70 years life expectancy by 2020 is one of the millennium development goals in nigeria. Introduction most of the analyst, economist and policymakers have favoredfloating exchange rate system over fixed. Oct 24, 2010 nigeria abandoned a fixed exchange rate regime in favour of floating exchange in 1986. An empirical evaluation of the impact of exchange rate on. Pestel analysis of the macroenvironment there are many factors in the macroenvironment that will effect the decisions of the managers of any organisation. This article looks at 7 of the main factors that cause changes and fluctuations in exchange rates and outlines the reasons for their volatility. This study examined the socioeconomic determinants of life expectancy in nigeria using data from 19802011. An empirical evaluation of the impact of exchange rate on the nigeria economy. Nigeria is diversified in term of ethnicity and religion.
Forex rates, interest rates, and inflation are all correlated. Doing business in nigeria requires that you understand the religion and cultural values of each group. Factors such as exchange rate, monetary expansion and fiscal imbalances, capital flight. The performance of ssa was even stronger without nigeria, where growth remained below the average of the other countries in the region. What are the factors that affect the exchange rate of a currency.
Inflation affects all macroeconomic variables like trade, growth and exchange rate. Sheng and hua 2012 studied on the empirical analysis of factors affecting chinas fdi. Economic factors affecting insurance industry can either enhance or hinder the thriving of insurance firms. The exchange rate that is generally listed on the foreign exchange market is generally referred to as the spot exchange rate unless it specifically indicates the forward exchange rate. First are studies based on the monetary models of exchange rate level determination morana 2009, gry. Impact of exchange rate fluctuation on nigerias economic growth 19812015, full project materials. If markets fear a government may default on its debt, then investors will sell their bonds causing a fall in the value of the exchange rate. The result shows that the two factors exchange rate and inflation rate impact significantly on the gross domestic product and economic growth of. Aside from factors such as interest rates and inflation, the currency exchange rate is one of the most important determinants of a countrys relative level of economic health.
In fact, the insurance industry relies on the economy for its survival. There can be a big difference from one month to the next. Analysis if the factors affecting exchange rate variability. Critical factors affecting nigerias foreign exchange flows. Effect of exchange rate fluctuation on firm profitability. The result suggests that one year past value of exchange rate and immediate past value of trade openness are the major determinants of exchange rate in nigeria. Specifically, the study investigates the effect of interest rate, inflation rate, exchange rate and the gross domestic product gdp growth rate, while the firm characteristics were size, leverage and liquidity. Investigation of the factors affecting real exchange rate in the. Determinants of inflation, exchange rate, and output in nigeria. If youre sending money back to nigeria, the nigerian money exchange rate is a constant concern. Effect of exchange rate fluctuations on manufacturing. The determinants of exchange rate volatility in south africa.
Time series data of 40 years on er, gdp, inflation, interest rate ir. It can be said that one of the factors determining the way exchange rate fluctuations affect economic growth is the development level of each countrys financial markets. Analysis of the factors affecting exchange rate variability in pakistan article pdf available in academic research international 23. Whether youre sending dollars or euros, the currency exchange rate is floating, which means that it can change at a moments notice. Factors affecting the exchange rate an exchange rate is the value of the currency of one country expressed in the currency of another country. Mar 10, 2020 under some circumstances, the value of government debt can influence the exchange rate. Factors that affects the nigeria naira and its foreign. Nevertheless, we still celebrate our unity in diversity. Higher exchange rates adversely affect a countrys balance of trade but lower exchange rates have a positive effect on it. What are the causes of fluctuations in exchange rate. This provisional pdf corresponds to the article upon acceptance. Other factors that led to the misalignment of exchange rate in nigeria is. This step was taking in order to address nigeria economic malfunctioning. Its an interesting question considering how important the exchange rate is to our annual goals and meeting these targets.
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