Dear Members of the Economics Division,

It is my pleasure to announce Damilola Fasina’s first annual review. Damilola is jointly supervised by Theo and Maria. The review presentation is due to take place on 19/03/20 at 13:00.

A reminder to all members of the economics division that this review has salience as it will assess the level of work that Damilola has undertaken in the past year and will seek to establish if Damilola should be registered as a PhD Student.

May I request that all members of the division try to attend? This is an important division-wide event. I would also remind all of our PhD students that they too should be attending to support one of their colleagues.

The Damilola’s talk will be on Exchange rate volatility, foreign direct investment, and financial development in the Economic Community of West African States.

The abstract for the talk is below.

Best wishes,

Hector

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Abstract

The Economic Community of West African States (ECOWAS) is an economic union comprising fifteen countries: Benin, Burkina Faso, Cape Verde, Cote d’ Ivoire, Gambia, Ghana, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Sierra Leone, Senegal, and Togo. It was established to foster economic integration in all fields of economic activity among the member states and promote economic development. ECOWAS is considered as one of the more effective economic blocs in Africa evident in its continuous efforts towards harmonising macroeconomic policies and promotion of economic integration across Africa. Most countries in ECOWAS depend heavily on natural resource commodities which serve as the major source of foreign exchange earnings. As a result, these countries, and thus subsequently the union itself, are heavily exposed to the effects of foreign exchange volatility given that international commodity prices are inherently volatile and heavily affected by financial or economic crises that may arise elsewhere yet lead to dramatic falls in the aggregate demand for African commodities.

Since the beginning of the century, multinational enterprises from both developed and emerging economies have been significantly expanding their activities in ECOWAS not only due to the availability of natural resources but also due to expanding investment opportunities in other sectors such as transportation, energy, telecommunications, and banking. As a result, foreign direct investment (FDI) has come to be contributing significantly to the economic growth and development of ECOWAS through transfers of knowhow and technology, creation of jobs and supply chains, as well as advancements in skilled labour and human capital.

The extant economic literature has put forward several competing theoretical arguments to explain the relationship between exchange rate volatility and FDI. However, the intuition behind these theories seems to be based exclusively upon the macroeconomic experience of western countries during the 1980s and 1990s; with respect to developing countries (and especially ECOWAS), the extant literature includes only empirical studies whose observations are given without any theoretical or intuitive justification. This study aims to examine the effect of exchange-rate volatility on FDI and how this relationship is in turn affected by financial development across ECOWAS. Our analysis will be based upon an empirical investigation, using panel-data cointegration techniques, to identify both common as well as individual factors across the countries in ECOWAS. More specifically, we will deploy sectoral FDI data to analyse the within- but also across-country relationship between exchange-rate volatility and FDI. This will allow us to test competing theoretical explanations in the literature for the effect of exchange-rate volatility on FDI and identify the ones that are relevant for key sectors of economic activity in the ECOWAS. Moreover, the interaction of sectoral FDI data with country-specific measures of financial development will allow us to describe how the underlying economic mechanisms evolve over time. Either of these dimensions of our analysis will make a novel contribution to the extant literature on the relationship between exchange rates and FDI, especially with respect to ECOWAS.