Commerce and Management
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Item An Empirical Analysis of Exchange Rate Volatility on Foreign Direct Investments in Sri Lanka(4th International Conference for Accounting Researchers and Educators, Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2018) Ariyasinghe, A.T.T.; Madurapperuma, M.W.Foreign direct investment is considered as one of key factor in determining factors for its economic growth. However, the macroeconomic environment in the host country must be favorable to attract foreign investment. Exchange rates of its currency against other foreign currencies are one of the main factors that affect the foreign direct investment of a country. The main objective of this study is to investigate the relationship between exchange rate volatility on foreign direct investments in Sri Lanka during the period of 2000 to 2017. Real exchange rate, Real exchange rate volatility, Openness of the economy, GDP per capita, stock of foreign direct investment and political situation were selected as independent variables while foreign direct investment was selected as a dependent variable. Data were collected through annual reports of Central Bank of Sri Lanka and World Bank. Data was analyzed using Vector Error Correction model. The results indicate a negative longrun relationship between exchange rate volatility and foreign direct investment for Sri Lanka. The existence of a short-run association was not Significant in Sri LankaItem Impact of Exchange Rate Volatility on Sri Lanka’s Trade Growth(Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) AL Soos, M.Y.M.; Madurapperuma, M.W.The exchange rate regime and foreign policy is an important measure of the macroeconomic management in endeavoring for economic development through improving the performance of export of the country. Many scholars pay their attention to study the impact of exchange rate volatility on the export growth. However, these studies do not provide a definite result that increased uncertainty has reduced exports, the majority of empirical research have found that there is a negative relationship between exchange rate volatility and export performance. The conclusion drawn from recent empirical literature is insignificant between export and exchange rate volatility. Very few studies found significant relationships between export and exchange rate volatility. Therefore, the purpose of this study is to investigate the impact of exchange rate volatility on exports in Sri Lanka. The research used quarterly data during the period 2000 to 2015. Data of this study was analyzed using cointegration, vector error correction model (VECM) and GARCH techniques. Findings of this study show that the presence of a unique cointegrating vector linking real exports, relative export prices, real exchange rate volatility in the long run. Real exchange rate volatility exerts significant negative effects on exports both in the short run and the long run. Further findings of this study show that real exchange rate impact positively on export. Overall, findings of these results show that trading activities of Sri Lanka can be improved by maintaining a stable competitive real exchange rate.