International Journal of Education and Social Science Research

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1 International Journal of Education and Social Science Research Vol. 1, No. 02; 2018 DOES INFLATION LEAD TO CURRENCY DEPRECIATION IN NIGERIA? AN AUTOREGRESSIVE DISTRIBUTED LAG (ARDL) BOUND TESTING Umar Bala 1, Yahaya Yakubu 2 and Salisu Baba Manu 3 1 Deartment of Economics, Faculty of Social and Management Sciences, Bauchi State University Gadau-Nigeria Deartment of Economics, Faculty of Economics and Management, University Putra Malaysia-Malaysia 1 Address: ubul1@yahoo.co.uk 2 Address: fatyat2009@gmail.com 3 Address: sbmmisau@yahoo.com ABSTRACT This study alied monthly time series data ranging from January 2008 to Aril 2017 to examine whether inflation leads to currency devaluation in Nigeria. An autoregressive distributed lags (ARDL) rocedure was used in the assessing the short and the long-run results while ordinary least square (OLS) fully modified OLS (FMOLS) and dynamic OLS (DOLS) are used for robustness checking. The result reveals that inflation is ositively affecting exchange rate in Nigeria. Once inflation rises, the Nigerian currency (Naira) dereciated. Therefore, the central bank of Nigeria (CBN) should determine the secific threshold level of inflation target (inflation adverse) with a minimum influence on exchange rate. Keywords: exchange rate, inflation, currency devaluation, ARDL INTRODUCTION Inflation is the most imortant indicator in an economy, which can hold the resonsibility to influence the exchange rate movement. High level of inflation may reduce the value of the domestic currency esecially when the economy highly deends on foreign roducts. However, a moderate inflation may hel an economy to maintain the value of domestic currency since inflation reduces the urchasing ower in the domestic economy. During inflation what haened to the domestic currency in the international market? The exchange rate is the intermediary to measure the value of a nation s currency against other nation s currency through the monetary olicy. The changes in exchange rate might induce changes in the economic external sector, caital flow, and financial stability, which may affect the relative rices of goods and services and the level of sending by individuals and firms. Has inflation is one of the major macro economic indicator in every economy that olicy makers are targeted to maintain a secific digit in order to have favorable and smooth economic activities. In Nigeria, Inflation has a serious issue the olicy makers esecially Central Bank of Nigeria (CBN) has encountered unstable and nonsto fluctuated of inflation in the ast decades. Looking at the huge discreancy between the real and the nominal exchange rate this study tried to exlore whether the exchange rate deends on the level of inflation. There is substantial theoretical base together with the emirical literatures that have attemted to examine the link between inflation and exchange rate in the revious studies (McCarthy, 1999; Takhtamanova, 2010; htt://ijessr.com Page 49

2 Iwayemi and Fowowe, 2011 Adeyeye et al., 2012; Jiang and Kim, 2013; Aleem and Lahiani, 2014; Oong et al., 2015). There are many researchers that have done on the exchange rate ass-through to imort rice (Goldberg and Knetter, 1997; Ghosh and Rajan, 2009; Doğan, 2013; Jimborean, 2013; Beckmann et al., 2014). Some researchers focus on the degree of exchange rate ass-through to consumer and roducer rice (Woo, 1984; Feinberg, 1986; Feinberg, 1989; Mirdala, 2014; Aron et al., 2014). The research investigates the exchange rate ass through to aggregate rices (Bacchetta and Wincoo, 2003; Gagnon and Ihrig, 2004; Cama and Goldberg, 2005; Bala et al., 2017). McCarthy (1999) did research in nine develoed countries on exchange rate ass-through, he concludes that in recent years, exchange rates do not exect a greater imact on their domestic inflation, and might be a minor imact. Guillermo et al. (2014) alied Mexico monthly data of annual growth rates used structural vector autoregressive model. Reveal that consumer rices that are affected by exchange rate ass-through are relatively insignificant. Cunningham and Haldane (2000) reveal that there is an indication of a decreasing in ass through in Brazil, Sweden, and United Kingdom. (Garcia, 2001) the highlight there is little ass-through in Chile. Takhtamanova (2008) found that the extended level of how roducers are assing the fluctuations of exchange rate into the general rice level deends on the elasticity of demand and cost functions. Among the exchange rate and inflation studies that have done in Nigeria are: Imimole and Enoma (2011) investigated how inflation is affected by the exchange rate dereciation found that exchange rate dereciation leads to an increase in inflation. Oriavwote and Oyovwi (2012) used annual data range from 1970 to 2010, the results indicate that real effective exchange rate is influencing by the level of rice, while Adeyeye et al. (2012) in their aer revealed that all the indeendent variables were significantly affected inflation. (Olofin et al., 2014) Their main findings indicate that the Central Bank of Nigeria (CBN) under the financial olicy to create an otimal level of exchange rate, which that the main target of sustaining a favorable transaction will be achieved. From 1996 till 2015 inflation rate was recorded averagely ercent, in January of 1996 inflation rate reaches the threshold level of ercent while in January of 2000 was the lowest recorded inflation rate of ercent. Since from February of 2013 Nigerian inflation was below 9.3 this may be because of the increase in oil rice. Some evidence that is driven the inflation rate is due to the devaluation of the currency, causes the rices of both imorted and domestic made increased, esecially during a seasonal festival eriod like Eid-Fitri/Kabir and Xmas eriod (NBS, 2015). Since 2011 the central bank of Nigeria under the monetary section agenda has concentrated on a strong aim to maintain inflation in a single digit, this really hels the fluctuation in inflation rate rosects. The consequence and the imacts of the fiscal consolidation and contraction monetary olicy, the inflation rate benefited and remain monitored. Once currency is affected by inflation it will tend to lose its values, which is not reflecting the real value. In another way, in the foreign exchange market, the domestic currency will ay more in order to exchange with other international currencies. Indirectly all the imorted goods and services will become more exensive in the domestic country. While to the rest of the world will benefit has exorted goods and services from dereciated currency are less exensive. Inflation is when the rices of good and services are increasing over time comared to their actual market value. Figure 1 shows the exchange rate of Nigerian currency (Naira) was strong as the value of U.S dollar since the indeendence in Even in 1985, the exchange was at the rate of N0.935 to $1.00. The imlementation of structural adjustment rogram (SAP) in 1986 contributed significantly in romoting the dereciation of the currency. Consequently, a devaluation of Nigerian currency usually occurred during the high level of inflation. htt://ijessr.com Page 50

3 In 1990, the Nigerian currency Naira exchanged N7.901 to $1.00 but the demand ressure ushed the value down. In 1994, the central bank of Nigeria decided to eg the currency at the rate of N to $1.00. But it was not stable in 1999 which was dereciated to N86 to $1.00 also in 2007 it was exchanged at N to $1.00. In 2014, Naira was devalued by the Central Bank of Nigeria from N168 to 176 to $ Official Exchange Rate 160 Naira/US dollar Figure 1 Exchange Rate Movement Source: World Bank online Database Nevertheless, Nigerian currency Naira still dereciates more than exected in the day to day foreign exchange market. Even though the olicy makers adot all the necessary majors, the target is not achieved, in which it is attributed by the fluctuation of oil rice and high demand of foreign roducts and services by Nigerian. The real effective exchange rate marginal areciation is influencing by the relatively high inflation rate in Nigeria comare to its trading artners inflations (CBN, 2014). Figure 2 shows that in the fourth quarter of 2014, the analysis of the traded-weight average Nigerian currency exchange rate via their major trading artner s currency has indicated that in the nominal effective exchange rate (NEER) Nigerian currency slightly loss value to 96.3 from 94.3 recorded in the receding quarter. Indicate a nominal areciation of the Nigerian currency during the review eriod relative to the currencies of its trading artners. Also, the real effective exchange rate (REER) indicated that Nigerian currency loss value to 58.6 from 62.1 recorded in the corresonding quarter of In the real term, the Nigerian currency is indicating an areciation to its trading artners and the level of cometitiveness is a loss. Figure 3 shows the ositive correlation between inflation and the two roxies of exchange rate (real and nominal). This means that the more inflationary ressure, the exchange rate dereciation/devaluation in Nigeria. Earlier than 2014 even inflation increases, the exchange rate is not much dereciated. htt://ijessr.com Page 51

Inflation % Figure 2 Nominal and Real Indices in Nigeria Source: Central Bank of Nigeria (2014) 20 18 Real and Nominal Exchange Rate 180 160 140 120 100 80 60 16 14 12 10 8 6 2008 2009 2010 2011 2012

4 Inflation % Figure 2 Nominal and Real Indices in Nigeria Source: Central Bank of Nigeria (2014) Real and Nominal Exchange Rate NEER REER INF Figure 3 Nominal, Real Exchange Rate and Inflation Rate Source: Central Bank Statistical Bulletin The rest of the aer is arranged as follows, a literature review in the following subheading, followed by exlaining the methodological rocess and data. In the next section is discussion and resents the estimated results, lastly, conclusion and recommendations. Data and Methodology For urose of this research, we alied monthly time series data ranging from January 2008 to Aril Inflation is an average inflation rate while the exchange rate is the real and nominal htt://ijessr.com Page 52

5 domestic exchange rate (Naira) units relative to the U.S. dollar. All data are sourced from World Bank online database. Autoregressive Distributed Lag (ARDL) framework accomlished the simultaneous and logical modeling in both short and long-run relationshis were adoted. The imortance of ARDL cointegration equation is based on the assumtion of serially uncorrelated residuals, it generates the dynamic error correction illustration connected with the long-run cointegrating regressions. Following Pesaran and Shin (1998) emloyed ractical bounds testing valid irresective of whether the variables are I(0), I(1). Finally, the methods have a range of Monte Carlo exeriment, which largely validates the estimation and inferential framework, revealing little bias in estimation and considerable ower of the key test statistics. Moreover, it calculates observed -values for the cointegration value and confidence intervals for dynamic multiliers by means of a non-arametric bootstra. These exercises highlight a further desirable ower and quality of this method. It is simle estimation by OLS and easy inferential methods rovide a straightforward and reliable means of discriminating between the various forms of combinations. This study attemts an emirical rocedure to exlore the interlink between exchange rate and inflation in Nigerian by alying ARDL bound test roerties to test for the long-run and short-run relationshi in bivariate models. Augmented Dickey-Fuller and Philis-Perron test was alied to neutralize the data and free them for a unit root. Based on the ast research we develoed a hyothesis. Hyothesis 1: Exchange rate deends on inflation or, Hyothesis 2: Exchange rate does not deend on inflation The study secified the model's equations in an econometrics relation secification between the deendent and indeendent variable as below. EX t = α + βinf t = μ t (1) Where: EX t = Exchange rate which consist REER and NEER, INF t = Inflation, μ t = Error term, both the variables were transform into natural log. The exected sign of inflation is ositive, means that any increases in inflation will lead to increase the exchange rate (currency dereciation). ARDL Bounds Test for Cointegration EX t = α 0 + b i EX t i + c i INFx t i + δ 1 EX t 1 + δ 2 INF t 1 + μ t (2) i=0 i=0 The otimum lag is chosen by Akaike Information Criterion (AIC) and Schwartz Bayesian Criterion (SBC) for small samle comare the F-statistics with the critical bounds by Pesaran et al. (2001) for large samle Narayan (2005). If the F-statistics is greater than F-critical: Reject null, therefore cointegration exists If the F-statistics is less than F-critical: Fail to reject null, therefore no cointegration If the F-statistics is equal to F-critical: Inconclusive The satisfaction of cointegration leads to both the long run and short run estimation. htt://ijessr.com Page 53

6 Estimation of Long run Coefficients Estimation of Short-run Coefficients EX t = α 0 + b i EX t i + c i INF t i + μ t (3) i=1 i=0 EX t = α 0 + b i EX t i + c i INF t i + γect t 1 + μ t (4) i=0 In estimated by OLS based on re-arameterization of the long-run model, ECT reresents the otential retreats from the long run equilibrium (Baharumshah et al, 2009). γ is the adjustment coefficient. Results and Discussion In the time series literature, it is recommended that there is the ossibility of having a nonmeaningful outcome when the model contains variables is that are identified in the non-stationary or level form. Therefore, in order to take care of the surious results, we used two rominent unit root test to avoid the roblem. Moreover, we used the differences variables from the data to subtract the long-run information. This would only rovide incomlete evidence or short run evidence. The solution of this kind of issue such, in econometrics, it is recommended that the models will be tested for cointegration first before any further estimation. There are two unit root tests emloyed in this study Augmented Dickey-Fuller by Dickey and Fuller (1979) and the Phillis-Perron (1988). The null hyothesis under the ADF and PP tests are that the observed variable (tested) unit root. Once the variables are found to be stationary, then the study will continue to examine the long-run relationshi. Assume X to be any variable and the Augmented Dickey-Fuller (ADF) model can be defined as follows: i=0 t X Where is a ure white noise error term and X ( X X ) 2, X X X ), X t i ( X t i X t j ), and i reresents the number of recent time and j as the number of revious times or years. The hyothesis of ADF is t t X 1 H : 0, 0 H : 0, 0 X t 2 X t is non-stationary, (unit root) is stationary, (no unit root) The first differencing in unit root test is to be tested if non-stationary time series Y need to be differenced at the times to make it stationary. Then the result can be stationary and correct, hence one can roceed to test for the co-integration. Table 1 resent the unit root results conducted with ADF and PP rocedures. The results indicate that both the three variables are not stationary at level with trend or without trend. In first difference, all the variables become stationary with trend and without trend. t 1 m i 1 X i t i t 1 t 1 t t t 2 ( t 2 t 3 (5) htt://ijessr.com Page 54

7 Table 1 ADF and PP Unit-root Tests LEVEL 1 st DIFF. ADF PP ADF PP C C w T C C w T C C w T C C w T REER *** *** *** *** NEER *** *** *** *** INF *** *** *** *** The research alied the ARDL bound testing in estimating the relationshi between inflation and exchange rate in short and long run. The ARDL comes with numerous benefits and advancement over some cointegration methodologies. Among benefit and advancement in ARDL rocedure, it is alicable even the variables in the model are stationary at the level or first difference or are a mixture of the two but not second difference variable (Pesaran, 1997). It therefore devoid of rotesting roblem, it is also alicable to a small samle scoe (Narayan, 2005). Another advantage of this methodology is used general to the secific rocedure in order to generate the aroriate number of lags and to detect the data generating rocess that will fit the model (Laurenceson and Chai, 2003). In addition, the error correction model (ECM) can be derived from ARDL through a simle linear transformation (Banerje et al., 1993). The error correction term has catured the mixes with the short run adjustment with long run symmetry cointegration together with the long run evidence. However, the illustration estimation of this model is more advanced than that of the Johansen and Juselius s cointegration technique (Pesaran and Shin, 1999). To determine the cointegration relationshi between inflation and exchange rate unrestricted error correction model was used to generate the value of F-statistic resented in Table 2. The comuted F statistics must be greater than the uer bounds critical value of the Narayan (2005) Table. We have comuted the F- statistic to be , shows is greater than the uer bounds value, at 5 ercent level of significance. Therefore, they have long run relationshi (they are cointegrated). This is the evidence of rejection of the hyothesis of they are not cointegrated and accet the alternative. While in the second model is less than the Narayan uer bound value means no cointegration. Furthermore, we continue with the first model. Bounds test result F-statistics Lag Level of Unrestricted intercet and no significant trend LREER t = f (LINF t ) % LNEER t = f (LINF t ) % N=110 10% Table 3 resents the short and long run coefficient results, inflation is ositively affecting exchange rate at 1 er cent level of significance. Select the lag length selection criteria to select the ARDL model. For examle, the Akaike information (AIC) criteria select the ARDL (2, 2) and ARDL (2, 2) secifications, resectively. The estimates of the long run and short run coefficients based on these models are summarized in Table below: the models are searated into two sets (REER and NEER). Based on the coefficient results the first model with REER indicates that 1 ercent increases in inflation are related to 0.32 ercent dereciation of Nigerian currency Naira. In the second model with NEER indicate that 1 ercent increases in inflation are related to 0.43 ercent dereciation in Nigerian currency Naira. To understand the differences between the real effective exchange rate and nominal effective exchange rate we comare the value of the two coefficients in the estimated models. The results from the two models clearly show that the nominal effective exchange rate is affected more than the real effective exchange rate. htt://ijessr.com Page 55

8 Table 2 Estimating long run and the short run coefficient REER ARDL (2, 2) NEER ARDL (2, 2) Regressors Coefficient T-statistics Coefficient T-statistics Long-run results LINF *** *** inut t *** *** Short run results D(LREER(-1)) ** D(LINF) D(LINF(-1)) C *** *** ect( 1) *** *** LM ARCH Normality The research is conducted some diagnostic checking to validate the true mode of the model free from surious results referred to by Pesaran (1974). The study is conducted serial correlation test, functional form, heteroscedasticity test, Jaque-Bera normality test and lastly CUSUM test. All the diagnostic tests hyothesize that there is no which is good for the model when the -value reveal insignificant at 5 ercent level. The Cumulative Sum of Recursive Residuals (CUSUM) stability tests is iloted to show the relative stability of the model within the study eriod at 5ercent significance level CUSUM 5% Significance CUSUM 5% Significance To confirm the robustness of the results, the estimation was conducted with three different methods OLS, FMOLS and DOLS estimations. These methods address the bias caused by the endogeneity of the regressors by incororating the Phillis and Hansen (1990) semi-arametric correction into the OLS estimator. The left-hand side resents the real effective exchange rate (REER) results while the right-hand side resents the nominal effective exchange rate (NEER) results. It can be observed that both the three estimators reveal similar results, the coefficient of NEER is greater than for REER results. Table 3 Robustness results Real Effective Exchange Rate (REER) Nominal Effective Exchange Rate (NEER) OLS FMOLS DOLS OLS FMOLS DOLS Model 1 Model 2 Model 3 Model 1 Model 2 Model 3 LINF *** (5.81) *** (3.57) *** (5.09) *** (5.77) *** (3.02) *** (5.96) C *** (35.35) *** (17.48) *** (28.06) *** (30.20) *** (14.33) *** (23.22) htt://ijessr.com Page 56

9 CONCLUSION The objective of this research is to examine whether inflation leads to currency dereciation in in Nigeria using monthly time series data ranging from January 2008 to Aril The findings reveal that the two roxies of exchange rate in the model are cointegrated. Furthermore, the findings reveal that there is a ositive and significant influence of inflation on exchange rate in Nigeria over the eriod of the study. The results imly that there is evidence of exchange rate misalignment in Nigerian currency due to the unstable level of inflation. This suggestion shows that there is an indication of a substantial transfer of inflation into weakening the Nigerian currency Naira in the foreign exchange market. Usually, the weakening in the Nigerian currency is caused by inflation has confirmed by the results when the nominal exchange rate is used. This research is more focus on how inflation stimulates and influences the weakening the Nigerian currency to less value is slightly unfavorable. The actual value of Nigerian currency is affected by other externalities, the central bank of Nigeria has to make more effort, olicies that will rise and make the currency more stable. This will encourage the articiation of both domestic and foreign investors to invest their caital in the economy. REFERENCES Adeyeye, C., Kola, J., Centre, N. M., & Kwali, S. (2012). Emirical analysis of the causes and effects of inflation in Nigeria. Journal of Economics and Sustainable Develoment, 3(11), Aleem, A., & Lahiani, A. (2014). A threshold vector autoregression model of exchange rate assthrough in Mexico. Research in International Business and Finance, 30(1), htt://doi.org/ /j.ribaf Aron, J., Creamer, K., Muellbauer, J., & Rankin, N. (2014). Exchange rate ass-through to consumer rices in South Africa: Evidence from micro-data. Journal of Develoment Studies, 50(1), htt://doi.org/ / Bacchetta, P., & van Wincoo, E. (2003). Why do consumer rices react less than imort rices to exchange rates. Journal of the Euroean Economic Association, 1(23), Baharumshah, Z. A., Mohd, S. H., & Ahn, S. (2009). On the redictive ower of monetary exchange rate model: the case of the Malaysian ringgit/us dollar rate. Alied Economics, 41, Bala, U., Songsiengcha, P., & Chin, L. (2017). Asymmetric behavior of exchange rate ass-through in Thailand. Economic Bulletin, 37(2), Banerjee, A., Dolado, J., Galbraith, J. W., & Hendry, D. F. (1993). Cointegration, error correction and the econometric analysis of non-stationary data: Advanced Texts in econometrics. (Rerinted 2003). New York: Oxford University Press. Beckmann, J., Belke, A., & Verheyen, F. (2014). Exchange rate ass-through into German imort rices a disaggregated ersective. Alied Economics, 46(34), htt://doi.org/ / Cama, M., & Goldberg, L. S. (2005). Exchange rate ass-through into imort rices. The Review of Economic and Statistics, 87(November), Cunningham, A., & Haldane, A. W. (2000). The monetary transmission mechanism in the United Kingdom: Pass-through and olicy rules. Working Paer No. 83. Santiago: Central Bank of Chile. Doğan, B. Ş. (2013). Asymmetric behavior of the exchange rate ass-through to manufacturing rices in Turkey. Emerging Markets Finance and Trade, 49(3), htt://doi.org/ /ree x htt://ijessr.com Page 57

10 Feinberg, R. M. (1986). The interaction of foreign exchange and market ower effect on German domestic rices. Journal of Industrial Economics, 35. Feinberg, R. M. (1989). The effects of foreign exchange rate movements on US domestic rices. Review of Economics and Statistics, 71. Gagnon, J., & Ihrig, J. (2004). Monetary olicy and exchange rate ass-through. International Journal of Finance and Economics, 9(4), Garcia, R. (2001). Price inflation and exchange rate ass-through in Chile. Central Bank of Chile Working Paers, (128). Ghosh, A., & Rajan, R. S. (2009). What is the extent of exchange rate ass-through in Singaore? Has it changed over time? Journal of the Asia Pacific Economy, 14(1), htt://doi.org/ / Goldberg, P. K., & Knetter, M. (1997). Goods rices and exchange rates: what have we learned? Journal of Economic Literature, 35, Guillermo Peón, S. B., & Rodríguez Brindis, M. A. (2014). Analyzing the exchange rate assthrough in Mexico: Evidence ost inflation targeting imlementation. Ensayos Sobre Política Económica, 32(74), htt://doi.org/ /s (14) Imimole, B., & Enoma, A. (2011). Exchange rate dereciation and inflation in Nigeria ( ). Business and Economics Journal, 28, Iwayemi, A., & Fowowe, B. (2011). Imact of oil rice shocks on selected macroeconomic variables in Nigeria. Energy Policy, 39(2), htt://doi.org/ /j.enol Jiang, J., & Kim, D. (2013). Exchange rate ass-through to inflation in China. Economic Modelling, 33, htt://doi.org/ /j.econmod Jimborean, R. (2013). The exchange rate ass-through in the new EU member states. Economic Systems, 37(2), htt://doi.org/ /j.ecosys Laurenceson, J., & C.H.. J Chai. (2003). Financial Reform and Economic Develoment in China. Cheltenham, UK, Edward Elgar. McCarthy, J. (1999). Pass-Through of exchange rates and imort rices to domestic inflation in some industrialized Countries. Federal Reserve Bank of New York. Mirdala, R. (2014). Exchange rate ass-through to consumer rices in the Euroean transition economies. Procedia Economics and Finance, 12(March), htt://doi.org/ /s (14) Narayan, P. K., & Smyth, R. (2005). The residential demand for electricity in Australia : an alication of the bounds testing aroach to cointegration. Energy Policy, 33, htt://doi.org/ /j.enol Nigeria, C. B. O. (2014). External Sector develoment reort. economic olicy directorate CBN. Olofin, S. O., Olubusoye, O. E., Mordi, C. N. O., Salisu, A. A., Adeleke, A. I., Orekoya, S. O., Adebiyi, M. A. (2014). A small macroeconometric model of the Nigerian economy. Economic Modelling, 39, htt://doi.org/ /j.econmod Oong, A., Abruquah, L. A., Agyeiwaa, D., Owusu, A. D., Quaye, I., & Ashalley, E. (2015). Key determinants of inflation in Ghana. British Journal of Economics, Management & Trade, 8(3), htt://doi.org/ /bjemt/2014/18024 Oriavwote, V. E., & Oyovwi, D. O. (2012). The determinants of real exchange rate in Nigeria. International Journal of Economics & Finance, 4(8), htt://doi.org/ /ijef.v4n8150 Pesaran, M. H. (1997). An autoregressive distributed lag modeling aroach to cointegration analysis. htt://ijessr.com Page 58

11 Pesaran, M. H., & Shin, Y. (1998). Generalized imulse resonse analysis in linear multivariate models. Economics Letters, 58(1), htt://doi.org/ /s (97) Pesaran, M. H., & Shin, Y. (1999). An autoregressive distributed lag modelling aroach to cointegration analysis. In Econometrics and Economic Theory in the 20th Century (Vol. 31, ). htt://doi.org/ /ccol Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing aroaches to the analysis of level relationshis. Journal of Alied Econometrics, 16(3), htt://doi.org/ /jae.616 Takhtamanova, Y. F. (2008). Understanding changes in exchange rate ass-through. Federal Reserve Bank of San Franciso Working Paer, 13. Takhtamanova, Y. F. (2010). Understanding changes in exchange rate ass-through. Journal of Macroeconomics, 32(4), htt://doi.org/ /j.jmacro Woo, W. T. (1984). Exchange rates and the rices of nonfood, nonfuel roducts. Brookings Paers on Economic Activity, 2. htt://ijessr.com Page 59

Causal Links between Foreign Direct Investment and Economic Growth in Egypt

J I B F Research Science Press Causal Links between Foreign Direct Investment and Economic Growth in Egyt TAREK GHALWASH* Abstract: The main objective of this aer is to study the causal relationshi between