An Empirical Test of the Relationship between Exchange Rate, Interest Rate and Inflation in Five African Countries from 1980 To 2012

1
Dr. Amachree, Queen Ori-Ibim
Dr. Amachree, Queen Ori-Ibim
2
Dr. Amachree
Dr. Amachree
3
Queen Ori-Ibim
Queen Ori-Ibim
1 University of Port Harcourt

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The study examines the empirical relationship between exchange rate, interest rate and inflation in the context of Sub -Sahara African countries using panel data over 1980-2012 periods. The estimated values of the pooled, fixed and random effects models reveal identical results that interest rate and inflation maintain a monotonous relationship with the exchange rate, though the relationship is insignificant for interest rote only in the random effect model based on 1% level of significance. However; the result of the Hausman Test shows that the random effect model is not appropriate rather, the fixed-effect model is preferred. Based, on the Johansen Fisher panel co integration approach, a long-run relationship is established among the specified variables. Finally, it was discovered that the interest rate is weakly exogenously determined in the selected-countries throughout the freely and managed floating exchange rate systems.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

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No ethics committee approval was required for this article type.

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Not applicable for this article.

Dr. Amachree, Queen Ori-Ibim. 2020. \u201cAn Empirical Test of the Relationship between Exchange Rate, Interest Rate and Inflation in Five African Countries from 1980 To 2012\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 20 (GJMBR Volume 20 Issue C5): .

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GJMBR Volume 20 Issue C5
Pg. 57- 65
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Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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GJMBR-C Classification: JEL Code: F31
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November 18, 2020

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The study examines the empirical relationship between exchange rate, interest rate and inflation in the context of Sub -Sahara African countries using panel data over 1980-2012 periods. The estimated values of the pooled, fixed and random effects models reveal identical results that interest rate and inflation maintain a monotonous relationship with the exchange rate, though the relationship is insignificant for interest rote only in the random effect model based on 1% level of significance. However; the result of the Hausman Test shows that the random effect model is not appropriate rather, the fixed-effect model is preferred. Based, on the Johansen Fisher panel co integration approach, a long-run relationship is established among the specified variables. Finally, it was discovered that the interest rate is weakly exogenously determined in the selected-countries throughout the freely and managed floating exchange rate systems.

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An Empirical Test of the Relationship between Exchange Rate, Interest Rate and Inflation in Five African Countries from 1980 To 2012

Dr. Amachree
Dr. Amachree
Queen Ori-Ibim
Queen Ori-Ibim

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