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International Financial Risk, Investment and Growth in
Pat Donwa* and Osaro Agbontaen**
This study analyzes the impact of international finance risk and domestic
investment on the levels of growth in the Nigerian economic. Essentially, the
researchers adopted the vector autoregression (VAR) approach method
taking into consideration macroeconomic variables such as exchange rate
volatility which was used to represent international financial risk. Investment
is captured by gross capital formation and real GDP growth in order to
determine the impact of the shocks associated with international financial
risk and investment in relation to economic growth in Nigeria. To specify an
appropriate model for this research, the structural and the political changes
of Nigeria through the period of after trade liberalization and the present
financial sector reform were considered. The variables used in the model
indicated basic statistical significance levels and it was noticed that the
present levels of international financial risk seriously distorts the levels of
growth in the economy. Also, one period lagged investment inhibits growth
and growth at its second lag slows present levels of economic growth.
Therefore, the impact exhibited by international financial risk, the first lag
value of investment and the second lag value of economic growth exhibited
negative impacts on the present levels of growth in the Nigerian economy.
This indicates that distortions as a results of fluctuations in international
financial risk and the levels of uncertainties in the previous levels of
investment and growth shrinks the present levels of growth in the economy.
This study has implications for investors, scholars and policy makers.
Keywords: Economic growth, policy regulation, growth analysis
JEL code: F43, G28, L51, R11
*Senior Lecturer, Department of Accounting, University of Benin, Benin City, Edo State, Nigeria.
**Research Assistant, Department of Accounting, Economics and Finance, Lagos Business
School, Lagos State, Nigeria.