Exchange rate volatility and portfolio equity flows in Mauritius

Pasi, Tinotenda (2016-12)

Thesis (MDF)--Stellenbosch University, 2016.

Thesis

ENGLISH ABSTRACT : This paper investigated the effect of exchange rate volatility on portfolio equity flows in Mauritius for the period 2005:Q1–2013:Q4. The aim of the study was to establish whether exchange rate volatility is a significant determinant of portfolio equity flows in Mauritius. In addition, the study sought to establish the nature of the relationship between exchange rate volatility and portfolio equity flows in Mauritius. The exchange rate volatility series was generated from a GARCH (1,1) model. The study employed a trivariant model to estimate the effect of exchange rate volatility with a control variable at a time on portfolio equity flows in Mauritius. Nine models were estimated using either VAR or VECM models, depending on presence or absence of co-integration amongst the variables. The findings of the empirical analysis revealed that exchange rate volatility has a positive effect on portfolio equity flows in Mauritius. Using the VAR model, the analysis revealed that there is a dynamic relationship between exchange rate volatility and portfolio equity flows. The results show that exchange rate volatility Granger causes portfolio equity flows in Mauritius. Three variables had the most significant effect on portfolio equity flows in Mauritius; namely, inflation rate in the USA, economic growth in the USA and the exchange rate of Mauritius. This was consistent with previous studies, which observed that global push factors play a more dominant role in determining capital flows than domestic country specific pull factors.

AFRIKAANSE OPSOMMING : Geen opsomming beskikbaar.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/101345
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