One of the three broad objectives of the Federal Government of Nigeria’s Economic Recovery & Growth Plan (ERGP) is to build a globally competitive economy, with a key execution priority of stabilizing the macroeconomic environment. Macroeconomic policy instruments such as the **interest** **rate** and **exchange** **rate** remain prime monetary drivers of growth and competitiveness in any economy. This empirical study therefore proffers response to the question of which of **interest** **rate** and **exchange** **rate** makes more significant contribution to economic competitiveness in Nigeria. We have employed an Ordinary Least Square Regression technique to measure the impact of **interest** **rate** and **exchange** **rate** on GDP using data spanning from 1981-2016. Results reveal that **exchange** **rate** has more significant impact on economic competitiveness than **interest** **rate**. The Federal Government of Nigeria is therefore advised to implement policies to improve the **exchange** **rate** system in Nigeria.

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During the early 1990s much has been written about the return of foreign private capital to many of the larger Asian and Latin American countries. However, until 1992 there was little evidence that countries in sub-Saharan Africa were participating in this phenomenon. In this paper we use variance decompositions and impulse responses from vector autoregressions to shed light on the possible causes and consequences of capital inflows to four countries: Ghana, Kenya, Uganda, and Zimbabwe. We use trend-cycle decompositions to provide evidence linking the appreciation of the real **exchange** **rate** to periods of heavy capital inflows. We show that domestic real **interest** rates have played an important role in explaining the recent behavior of the real **exchange** **rate**. In particular, we trace the rise in domestic nominal and real **interest** rates to policies designed to liberalize the domestic financial sector and attempts to curb the monetary expansion associated with the capital inflows through sterilized intervention.

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. Secondly, we argue that the capital market approach used by past empirical studies, such as Choi et al. (1992), Wetmore and Brick (1994) and Choi and Elyasiani (1997), only measures the bank’s foreign **exchange** and **interest** **rate** risks over and above that of the market portfolio. To estimate the bank’s total exposure to the foreign **exchange** **rate** and **interest** **rate** mo vements, we use orthogonalised, rather than actual, market returns to measure the time varying exposure of Chinese banks 3 . Thirdly, existing studies on banks’ exposure have examined almost exclusively the linear relationship between foreign **exchange** **rate** changes and bank returns 4 . This study relaxes the linearity assumption and investigates exposure component that may be caused by the nonlinear relationships between **exchange** **rate** movements and firm’s cash flows. Fourthly, we are the first to control for combined effects of the time-varying adjustments, nonlinear exposure and the market return orthogonalisation on the foreign **exchange** and **interest** **rate** exposure of individual banks. Finally, the time varying exposure coefficients allow us to use panel regressi ons to examine the determinants of banks’ exposure to **interest** **rate** and foreign **exchange** fluctuations. In addition to their ability to overcome the small-sample size problem, panel regressions deal with the potential biases associated with

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Hashemzadeh and Taylor (1988) have found bi-directional causality present in regression models between money supply and stock returns using stock indexes to estimate market returns. As regards, the **interest** **rate** the results are not as conclusive. The direction of causality seems to be mostly running from interest’s **rate** to stock price but not the other way. Solnik (1987) found a weak positive relation between real stock return de f erential and the changes in the real **exchange** **rate** and he also found that a real growth in the stock market also has a positive influence on the **exchange** **rate**.

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After confirming stationarity between the variables using the Augmented Dickey Fuller unit root, the cointegration test of Johansen (1988, 1991) and Phillips and Ouliaris (1990) is also applied to avoid spurious analysis. Thereafter the long-run association amid **exchange** **rate**, inflation and **interest** **rate** is determined by the use of a single vector cointegration procedure. Although various methods can be utilized are applicable for testing coiintegration. The “Fully Modified OLS” of Phillips and Hansen (1990) is utilized in this paper. This method has the merit of attaining asymptotic effectiveness by putting into consideration the existence of autocorrelation and to impede the endogeneity issues between regressors. The Dynamic OLS and Canonical Cointegration Regression of stock and Watson (1993) are used for robustness to confirm the consistency of the FMOLS result. The DOLS approach further has a merit of preventing probable effects of endogeneity in the regressors that might occur. If cointegration is confirmed amid the variables, the individual cointegration regressions can be applied to the individual order of series. Therefore to estimate the long-run regression the FMOLS, DOLS and CCR are employed. Model expression:

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Though these four factors are independent in nature because of the globalization all these are dependent one another. The above picture clearly explains that when there is a shock in FDI the response of Real **interest** **rate** goes negative in the beginning later moves closer to zero .same way GDP continues negative for four years later start to move in an uptrend. The **exchange** **rate** in the positive trend.

Innovations in real **interest** rates have a slightly weaker impact on changes in expectations about future dividends. France has 39% significant sectors, the UK 37.5%, Italy 32% and Germany 25% There is an even spread be- tween negative and positive revisions to expectations across the industry sectors in each country. The majority of the betas capturing news about future excess returns are significant. With respect to innovations in changes in **exchange** rates, the betas are mostly negative for German and Italian in- dustry portfolios, while for France and the UK there is a relatively even split between negative and positive betas on the sectors. Typically the absolute values of the **exchange** **rate** dividend betas are greater than those of the ex- cess return betas. However, for unexpected changes in real **interest** rates the excess return betas are larger in Germany, Italy and the UK than the cash flow betas. The results for the French sectors show that the magnitude of revisions to expectations about future dividends is greater than the changes to expectations about future excess returns.

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The study empirically investigates the impact of **interest** **rate** and **exchange** **rate** on capital market performance in Nigeria. Secondary data were obtained from central bank of Nigeria statistical bulletin and Security **exchange** commission (SEC) covering the period of 1978 to 2012. Multiple regressions and Unit roots were employed to analyze data on variables such as **interest** **rate**, **exchange** **rate**, and market capitalization with the adjusted R 2 which significant at 0.9256 (92.6%), it signifies that **interest** **rate** and **exchange** **rate** accounted for 92.6% of the variation in the influence of the market capitalization in Nigerian capital market. It is therefore concluded that **exchange** **rate** has positive impact on capital market but there is a negative relationship between **interest** **rate** and capital market performance. The result suggests that Government should ensure appropriate determination of **interest** **rate** level that will break the double-edge effect of **interest** **rate** on savers and local investors in order to encourage investment and transactions in Nigerian Capital Market. Only the **interest** **rate** policy that can attract savings mobilization and encourage domestic investment will help the economy.

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In view of the importance of a well-managed **exchange** **rate** and **interest** **rate** for economic growth, this study employs econometric methodologies such as co- integration and Error Correction framework to examine the relative effects of **exchange** **rate** and **interest** **rate** on Nigeria’s economic growth. The study uses the Error Correction Model (ECM) framework after co-integration has been established among the variables. The ECM is employed to estimate the relative effects of **exchange** **rate** and **interest** **rate** on economic growth. The use of this approach predicts the cumulative effect taken into account the dynamic effect among **exchange** **rate**, **interest** **rate** and other examined variable. Once the variables are co-integrated, it becomes easy to distinguish between the long-run and short-run relationship. Therefore, to capture both the long-run and short-run dynamics of **exchange** **rate** and **interest** **rate** on economic growth in Nigeria, an ECM employing the Johansen co-integration techniques was employed which allows for the estimation of short-run dynamics as well as long-run equilibrium adjustment processes.

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ABSTRACT: This paper examines the multi-scale relationship between the **interest** **rate**, **exchange** **rate** and stock price using a wavelet transform. In particular, we apply the maximum overlap discrete wavelet transform (MODWT) to the **interest** **rate**, **exchange** **rate** and stock price in US over the period from january 1990 to december 2008 and using the definitions of wavelet variance, wavelet correlation and cross-correlations to analyze the association as well as the lead/lag relationship between these series at the different time scales. Our results show that the relationship between **interest** **rate** and **exchange** **rate** is not significantly different from zero at all scales. On the other hand, the relationship between **interest** **rate** returns and stock index returns is significantly different from zero only at the highest scales. The **exchange** **rate** returns and stock index returns have a bidirectional relationship in this period at longer horizons.

Since the post-crisis in 1997-1998, that has an enormous effect on the high inflation **rate**, which affects the **interest** **rate** volatility of Asian economies, particularly Indonesia. Therefore, the determination of **interest** rates is not only influenced by inflation but also the sharing of factors that can cause a bank to determine the size of the **interest** **rate**, whether it is deposits, savings, or credit. The purpose of this study is to analyze the effect of macroeconomic variables on the **interest** **rate** volatility in Indonesia. We used ordinary least square to estimates the quarterly data from 2002: I to 2017: I. The estimation result finds that the dynamic in the money supply, inflation **rate**, and the **exchange** **rate** of the IDR vis-à-vis USD has a positive and significant effect on the **interest** **rate** volatility. However, the business cycle has an inverse effect on the **interest** **rate** volatility in Indonesia.

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causal relationships between stock prices and **exchange** rates by using data from 2001:02-2008:01. The results reveal the existence of a bidirectional causal relationship between the **exchange** **rate** and stock prices. Büyükşalvarcı [20] investigates the effects of some macroeconomic variables (such as consumer price index, oil price, **exchange** **rate** and money supply) on the ISE 100 index using multiple regression analysis for the period 2003:01-2010:03 in Turkey. Yıldız and Ulusoy [21] examine the effect of **exchange** **rate** volatility on the Turkish stock market using monthly data for the period 1987-2010. They find no significant relationship between volatility of **exchange** **rate** and Turkish stock returns. Zia and Rahman [22] attempt to analyze the dynamic relationship between stock market index and **exchange** **rate** data over the period January 1995 to January 2010 in Pakistan. Their findings show no causality between **exchange** **rate** and stock prices. Anlas [23] explores the relationship between **exchange** rates and the Istanbul stock **exchange** **rate** by employing monthly data from January 1999 and November 2011. The study indicates that changes in the value of US dollars and Canadian dollars are positively related to changes in the ISE-100. In addition, this study shows that fluctuations in domestic **interest** rates and the Saudi Arabian riyal have a negative impact on the index.

This research covers the influence of **interest** **rate**, **exchange** **rate** and inflation on stock returns of ASE Free float index. The three macro variables which are taken under consideration are deemed very major for the economy of any country. Therefore, any change among these variables consequence the economy in different ways. Thus, the authoritarian takes step in order to make adjusts in their rules which can involve the economy in a positive way. Ten years monthly data from 2005 to 2015 is taken in contemplation. Multiple regression models are applied on the data where result shows that firms are negatively correlated to **interest** **rate** and positively correlated to inflation with zero relationship with **exchange** **rate** and stock returns. Also, R square shows a weak relationship between independent and dependent variables.

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important determinants for an economy’s stability and development. This provides us with motivation to study the interactive relationships between these two factors. This paper focuses on one particular aspect of this relationship, namely, the implications of the managed floating **exchange** **rate**. The main objectives of this paper are as follows. First, we study whether the monitoring band regime in Singapore is related with a much higher flexibility of the **interest**-**rate** policy. The crisis leads to an increase in Singapore-U.S. **interest** differentials which means a breakdown of the Singapore-U.S. **interest** link. Second, the volatility of the **interest** differential in the crisis periods is expected to be higher than that in the non-crisis periods.

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Given the reality that sterilized intervention by industrial economies tends to be ineffective and that policy makers show no appetite to return to the kinds of controls on international capital flows that helped keep **exchange** rates stable over the Bretton Woods era, a commitment to damping G-3 **exchange** **rate** fluctuations requires a willingness on the part of G-3 authorities to use domestic monetary policy to that end--this, in turn, may require tolerating more variable **interest** rates. However, while trading patterns may become more stable in an environment of predictable G-3 **exchange** rates, debt-servicing costs do not as a result of the greater variability of international **interest** rates. The welfare consequences to an emerging market economy, therefore, are ambiguous, depending on initial conditions, the specification of behavior, and the dynamic nature of the tradeoff between lower G-3 **exchange** **rate** volatility and higher G-3 **interest** **rate** variability.

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However, as the recent experience of several Asian economies suggests, unless the central bank adopts a …xed **exchange** **rate** regime like China, it is not always possible to achieve a nominal depreciation. Orphanides and Wieland (2000) and Coenen and Wieland (2003), who also recommend that in the presence of the zero lower bound, the central bank should rely on the **exchange**-**rate** channel, suggest that the central bank can create a depreciation via a portfolio-balance e¤ect. In particular, this can be done by expanding the monetary base on a large scale. This paper, on the other hand, argues that in order to create a depreciation successfully, the central bank also has to rely on the expectations channel. That is, the present paper implies that aggressive monetary-base expansion proposed by Orphanides and Wieland (2000) may be e¤ective, but only if the central bank can make a credible promise to keep injecting liquidity into the economy going forward even when the de‡ationary pressure begins to subside. According to the analysis in this paper, by expanding the monetary base, but on a discretionary basis, and thereby only relying on the portfolio- balance e¤ect, the central bank may not be able to generate a depreciation.

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Starting with the mean, the Japanese yen/U.S. dollar **exchange** **rate** with a mean value of 105 reveals Japan as the economy with the weakest currency relative to the U.S. dollar, when compared to the **exchange** rates of the other G7 countries. The average **interest** **rate** for the period under consideration is 2% for Canada and the United Kingdom, which is the highest, and Japan is the country with the lowest **interest** rates. The inference from the standard deviation also is that Japan is the country with the most volatile **exchange** **rate**, while the United Kingdom has the least volatile **exchange** **rate**. However, as expected of developed economies, the standard deviation for the **interest** **rate** seems to be reasonable for both the euro and non-euro G7 countries. With respect to the distributions, we find evidence of non-zero skewness for all the series and across all the G7 countries. The kurtosis statistic is, however, mostly platykurtic in a number of countries, except in a few instances in the case of Japan, Canada, and the euro area. These differences could support our assumption of different responses of **exchange** rates to changes in the **interest** **rate** differential across countries.

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unaffected since the **interest** **rate** is held constant. Private consumption increases since household disposable income increases. On the money market higher income implies, higher money demand. The CBN must therefore let money supply increase if it holds the **interest** **rate** constant. **Interest** **rate** is currently constant at 18% and it remains largely to be seen the consequences of the action of the government of Nigeria particularly on agricultural sector. Agriculture is typically a sector which is most exposed to the influence of foreigntrade because almost all of its products are either exported or importable, or they are close substitutesin production or consumption with products which are importable or exportable. Cushman (1988); Chambers and Just (1991) indicated a significant depressive effect of **exchange** risk. However Abel (1983) showed that if one assumes perfect competition, convex and symmetric costs of adjusting capital, and risk neutrality, investment is a direct function of price (**exchange** **rate**) uncertainty. Hence, agriculturalprices are largely determined by those of international markets and by the filterthrough which the latter are transmitted to the domestic economy, which is the **exchange** **rate**. The summarized policy effects of Mundell- Fleming model is shown in Table 1:

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Emerenini and Eke [16] investigated the impact of monetary policy **rate** on inflation in Nigeria using monthly data from January 2007 to August 2014. The ordinary least square (OLS) method was adopted because of its best linear unbiased estimator (BLUE) property. The result showed that expected inflation, **exchange** **rate** and money supply influenced inflation, while annual treasury bill **rate** and monetary policy **rate** though rightly signed did not influence inflation in Nigeria within the period under investigation. The estimated model displayed that all the explanatory variables used for the analysis accounted for 90% variation in explaining the direction of inflation as regards to increase or decrease. The co-integration test showed that a long term relationship existed among the variables and they were stationary at order one I (1).

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In this paper we have studied the **exchange** and **interest** **rate** pass-through channels in China. First, the Granger causality test results show that the **exchange** **rate** and the Shanghai composite index return have a causal effect on both imports and exports. As to the **interest** **rate** channel, the results show that the deposit **rate**, lending **rate**, and Shanghai composite index return have causal effects on PPI. Second, the results of Johansen’s cointegration show a long-run relationship between the **exchange** **rate** and exports. On the other hand, we also find that both the deposit **rate** and the Shanghai composite index have a long-run equilibrium relationship with the Producer Price Index. Third, in the impulse response function, a sustained negative shock to the level of the **exchange** **rate** and the Shanghai composite index return induces a sustained decrease in the level of imports and exports. A sustained positive shock to the level of the deposit **rate**, lending **rate**, and the Shanghai composite index return induces a sustained decrease in the level of PPI. On the other hand, in the variance decomposition, we note that the **exchange** **rate** affects the variance of imports and exports. The deposit and lending rates also affect the variance of PPI.

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