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The dynamic relation between foreign exchange rates and international portfolio flows: Evidence from Africa's capital markets

Odongo Kodongo and Kalu Ojah ()

International Review of Economics & Finance, 2012, vol. 24, issue C, 71-87

Abstract: We examine the nexus between real foreign exchange rates and international portfolio flows using monthly data for the period 1997:1 to 2009:12 for Egypt, Morocco, Nigeria, and South Africa. We analyze the full sample period and two sub-periods, distinguished by the relative volume and volatility of portfolio flows. We find international portfolio flows, in Africa, to be non-persistent and relatively volatile. Granger causality tests and innovation accounting from vector autoregressions show that the dynamic relationship between portfolio flows and foreign exchange rates is both country-dependent and time-varying; and these findings are robust to alternative VAR specifications.

Keywords: Real exchange rates; Net portfolio inflows; Africa's capital markets (search for similar items in EconPapers)
JEL-codes: G15 F21 F31 F32 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1016/j.iref.2012.01.004

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