Analyzing the Relationship Between FDI and Foreign Reserves: Insights from Wavelet Coherence and Granger Causality
Keywords:
Foreign Direct Investment (FDI), Foreign Reserves, Wavelet CoherenceAbstract
This study investigates the dynamic relationship between Foreign Direct Investment (FDI) and foreign reserves across a global sample of countries. By employing wavelet coherence analysis and Granger causality tests, we provide a deeper understanding of the time-frequency dynamics between FDI inflows and foreign reserves. We analyze the data from a panel of 50 countries over the period of 1990-2020. The findings reveal significant short-term and long-term linkages between FDI and foreign reserves, with the direction and strength of causality varying across countries and over time. This paper highlights the importance of both FDI and foreign reserves in shaping the global financial landscape and offers insights into their interdependencies.
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