The rate of capital
flows into the emerging markets is alarming and has become a subject of debate
in the literature. It is mostly believed that capital flows are beneficial to
the economies of the developing countries as it engenders the efficient
allocation of global resources thereby increasing the availability of capital
required for investment and economic growth. Despite the general belief, the
macroeconomic variables that determine capital flows remain controversial. In
the light of this, the study attempted to examine the long-run and short-run
determinants of capital flows into Nigeria. The study employed secondary data
sourced from the Central Bank of Nigeria (CBN), FRED Economic data, and World
Development Indicator between the periods of 1986-2014. Using the econometric
technique of Autoregressive Distributed Lag Model (ARDL), the study found that
exchange rate (LnEXR) and stock market prices (LnSP) are important determinants
of capital flows into Nigeria both in the short-run and long-run. It is,
therefore, recommended that the government, through its policies, should make
concerted effort in boosting the activities at the stock market in a bid to
attract capital flows into the country.
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