Thesis in the Department of Economics

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    Exchange Rate Fluctuations and Inflation Rates in West Africa
    (2023) Ojo, Felix Ayoola
    In West African countries, the economic instability caused by inflationary pressure has prompted some concerns about the primary reasons driving inflation rates. This study examined the relationship between exchange rate fluctuations and inflation rates in 15 West African countries in the short run and long run covering a 31-year period from 1990 to 2020, with emphasis on differential effects in Anglophone and Francophone West African countries. The scope of the study is divided in geographical, contents and units of analysis. The Purchasing Power Parity (PPP) framework formed the basis for this study. The study adopted the monetarist and classical model of determinants of inflation which was remodified by incorporating inflation rate (INF), exchange rate (EXR), exchange rate volatility (EXRv), monetary policy variables, and fiscal policy variables. Panel data for all the variables were obtained from World Bank Development Indicators for the period under review. Linear Autoregressive Distributed Lag (ARDL) and non-linear Autoregressive Distributed Lag (NARDL) estimation techniques were used for result reliability. Volatility was generated through ARCH model while CUSUM test was carried out to check for the stability of the series. The ARDL model results showed that the previous inflation rate contributed about 7% to the recent price instability in the region. It was further revealed that exchange rate fluctuations positively influenced inflation rates by about 4% in Anglophone countries in the short run with greater influence in the Francophone countries. Meanwhile, the results from non-linear Autoregressive Distributed Lag (NARDL) model revealed that exchange rate depreciation contributed not less than 2% to inflation rate in the long run and was statistically significant. The findings from Anglophone countries demonstrated that the policy of the monetary authorities to increase the quantity of money in circulation, if well managed, will not result in high rate of inflation in West African countries. Findings from Francophone countries showed that money supply, economic growth rate, and public debt did not contribute to the inflationary trends in the region. However, producer price index, the degree of trade openness, exchange rate and value added triggered inflation rates in the Francophone countries within the period under review. According to the findings, exchange rate fluctuations contributed to inflationary pressures in the West African region. The study recommended that floating exchange rate regime should be maintained and supported with high productivity of farm produce for exports without damaging the consumption level of the domestic economy; and that monetary authorities in this region should employ contractionary monetary policy so as to reduce the stock of money in circulation. Monetary authorities in the region should also maintain single-digit inflation rate for price stability to be maintained. Single currency should also be adopted among the member states so as to stabilize cross-border transactions, and finally, concessions in form of subsidies should be given to domestic industries so as to enhance productivity which will reduce the prices of goods and services and thereby reduce inflation to the barest minimum.
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    A Comparative Study of Determinants of Capital Structure of Multinational and Domestic Firms in Nigeria
    (Department of Economics, College of Business and Social Sciences, Crawford University, Igbesa, Ogun State, 2023-09) Oyeneye, Kehinde Olufemi
    This study investigated the determinants of capital structure of multinational corporations (MNCs) and domestic corporations (DCs) in Nigeria. The main objective is to investigate how capital structure determinant affect multinational firms and domestic firms in Nigeria. To achieve this, fifty-three non-financial firms listed on the Nigerian Stock Exchange (NSE) over the period of 2005 to 2019 were examined. Five firm-specific factors (leverage, profitability, tangibility, age and size), four macroeconomic factors that vary over time (GDP growth rate, Interest rate, Inflation rate and exchange rate) and four foreign macroeconomic factors that vary over time but country-specific (GDP growth rate, Interest rate, Inflation rate and exchange rate) were sourced from several editions of NSE fact book, several annual reports of included firms, Central Bank of Nigeria (CBN) Statistical Bulletins and World Development Indicators. Four issues were specifically examined. The first was to determine if multinational firm\s leverage ratio differs significantly from that of domestic firms. The second issue was to investigate the effect of firm-specific factors on MNCs and DCs. The third was to determine the influence of macroeconomic factors on MNCs and DCs. Finally, the study examined the effect of home country macroeconomic factors on multinational firms only. Panel data analysis was conducted for all models using the Generalized Least Squares (GLS) technique based on period-weight and cross-section weight. The analysis was anchored on two major theories of capital structure; the dynamic trade-off theory and pecking-order theory. The result showed that leverage ratio of multinational firms differs and significantly lower than that of domestic firms. Some factors like profitability, tangibility, interest rate and size were found to be largely responsible for the difference. Based on profitability, the result further showed that domestic firms follow the theoretical prediction of trade-off theory while multinational firms follow the theoretical prediction of pecking-order theory. Interest rate and exchange rate were revealed to have similar impact on leverage ratio for both MNCs and DCs in Nigeria and are significant at per cent. In addition, the inclusion of parent-country macroeconomic factors improves the explanatory power of the model in terms higher adjusted R2. Finally, the study showed that both category of firms pursued target leverage and that both MNCs and DCs respond to deviation from target leverage at the same rate (0.29), resulting in a speed of adjustment of 3.4. Some of the major recommendations from the study is that policy makers and managers of firms should first consider the macroeconomic conditions at home and abroad before taking decision on how much debt to retain in their capital so that over exposure will not affect the firm value and eventual liquidation. In summary, the study showed that MNCs and DCs do not have the same capital structure and are influenced by firm-specific variables and macroeconomic variables differently. The government is encouraged to be aware of the effect of macroeconomic factors on leverage decision of firms and therefore should put in place policies that will make the macroeconomic conditions more favourable to MNCs and DCs financial stability.