Articles
Macro Finance & International Finance
The Dollar’s Double Life: Not All Dollar Rises Are Born Equal for the Cross-Currency Basis., with D. Ahelegbey and F. Gerth. Journal of Futures Markets, 2026
Dollar appreciations widen the cross-currency basis only when the dollar is weak. When the dollar is already strong, further appreciations no longer widen the basis and may tighten it. Evidence from G10 cross-currency basis swap spreads confirms this regime dependence.
Eurozone Output, Covered Interest Parity Deviation: Stronger Output Lessens Deviation? Journal of International Financial Markets, Institutions, Money, 2021
Our model predicts that a rise in eurozone relative output would lead to a tighter basis; a rise in eurozone relative money supply, and euro depreciation, would widen the basis in the long run. Interestingly, empirical results, with quarterly data from 2003 – 2018, support these predictions.
Inflation Differential as a Driver of Cross-currency Basis Swap Spreads. European Journal of Finance, 2020
As inflation differential expands in foreign countries vis-à-vis the US, and foreign entities take positions in US fixed income, foreign demand for hedges (i.e., forward dollar sales) increases relative to US supply of hedges (i.e., forward dollar purchases). Covered interest parity deviations worsen and the basis widens as the US dollar becomes less available and hence more special. This causes expected arbitrage profit - from new hedged trades by US dollar entities - to enlarge.
Covered Interest Parity Deviations in Standard Monetary Model. Journal of Economics and Business, 2020
A rise in relative money supply may lead to tighter basis to the extent that benchmark rate reflects policy rate, and money velocity declines in response to money demand.
Capital Flows and Economic Growth: Evidence from OPEC Countries. Quarterly Review of Economics and Finance, 2019
Capital flows have positive links with economic performance only in Qatar. The components of capital flows have differentiated effects on economic performance. OPEC countries must pay attention not only to capital flows but also to the types of capital flows and ensure conditions are benign for flows to be economically supportive.
Does the Long-run Monetary Model hold for Sub-Saharan Africa? A Time Series & Panel Cointegration Study. Research in International Business and Finance, 2018
Long-run monetary model has partial support in a panel of Sub-Saharan African countries: Exchange rate is weakened and improved by relative money supply and relative real output, respectively, in Sub-Sahara Africa.
Asset Pricing
Stock Market and Deviations from Covered Interest Parity: Evidence from Eurozone. Journal of International Financial Markets, Institutions, Money, 2021
Wider CIP deviations go hand-in-hand with lower stock returns. Outcome is due to the extra, and potentially riskless, ‘pickup’ associated with a higher positioning in foreign fixed income (on an FX hedged trade) when the basis is wider (more negative). This lowers positioning in stock market and dampens stock market returns.
How do Sovereign Risk, Equity, Foreign Exchange Derivatives Interact? Economic Modelling, 2021
There is feedback between credit default swap, cross-currency basis, and stock markets. Higher CDS widen CCBS and dampen stock indices. The feedback relies on CDS as an indicator of potential default on obligations.
Do Fundamentals Drive Relative Valuation? Evidence from Global Stock Markets, with K. Agudze. Journal of Financial Management, Markets, Institutions, 2020
Relative valuation multiples are negatively linked to their past. Fundamentals are an important driver of relative valuation multiples in the stock market. Do not ignore the outlook for relative valuation multiples made from fundamentals.
Revisiting Comovement of Cross-currency Basis and the Dollar: Rolling Correlation Approach, with K. Agudze and B. Thompson. Journal of Investing, 2020
As with other market variables, the links between cross-currency basis and the dollar are dynamic and depend on the prevailing market and economic conditions.
Interrelations among Major Cross-currency Basis Swap Spreads: Pre- and Post- Crisis Analysis. The Journal of Derivatives, 2019
Long-run links among 9 major cross-currency basis swaps viz the USD were weakened after GFC, but short-run linkages were strengthened. The influence of euro and Swiss basis on other European cross-currency swaps increased after the crisis; the Swiss became several times more influential on all European cross-currency swaps.
Exchange Rate Shocks and the Dynamics of International Asset-Backed Securities. Journal of Structured Finance, 2019
Unanticipated exchange rate appreciation tightens credit spreads of international asset-backed securities over time. The effects are most visible for the lowest investment grade asset-backed securities.
China-Africa Stock Market Linkages and the Global Financial Crisis, joint with B. Guo. Journal of Asset Management, 2019
The Chinese market positively influenced Africa’s stock markets before and during GFC. This influence has since disappeared after GFC despite the rise in the economic connectedness between China and Africa.
Optimal Asset Allocation of a Pension Fund – Does the Fear of Regret Matter? Journal of Economics Library, 2017. Invited submission
Maximization of wealth relies on the consistent increase in the allocation to risky assets, both in the accumulation and decumulation phases such that pension funds can realize gains from any upsides in the risky asset market and thus limit the feeling of regret ex post.
Corporate Finance
R&D Investment - Firm Performance Nexus: New Evidence from NASDAQ Listed Firms, joint with Y. Chen. North American Journal of Economics and Finance, 2019
R&D may not guarantee firm performance; it does when it does not exceed the required optimal level. Hansen (1999) model yields this optimal level.
Do Large Firms Benefit More from R&D Investment? European Journal of Applied Economics, 2019
Firm size plays an important role in determining how R&D contributes to firm performance. Bigger firms attract more positive contribution from R&D; smaller firms lose more when R&D dampens firm performance.
Leverage and Firm Performance – New Evidence on the Role of Firm Size, joint with F. Olokoyo. North American Journal of Economics and Finance, 2018
The intensity of the negative effect of leverage on firm performance depends on firm size. The bigger the firm size, the lower the effect of leverage on its performance.
Value and Wealth Creation: Stylized Evidence from Nigeria’s Listed Cement Firms. Quarterly Journal of The Africa-growth Agenda, 2017
The Nigerian cement industry has proven to be consistent in its value and wealth creation to different stakeholders especially the shareholders.
Development & Macroeconomics
CIP Deviations and Technology Shocks in Emerging Markets, joint with S. Coskun. Empirical Economics, 2022
We find that the response of CIP deviations to technology shocks is mostly positive across tenors but sometimes mixed. This is consistent with the second scenario of our stylized model: Technology shocks that enhance domestic output and tighten the basis are more domestic than external.
Explaining Differences in Income Levels in Africa – A Development Accounting Perspective, with S. Coskun. Optimum Journal of Economics and Management Sciences, 2020
Disparities in income levels in African cannot be explained by distortions in production efficiencies but also by efficiency of labor and investment.
Foreign Direct Investment and Growth. Evidence from Threshold Analysis Applied to Sub-Saharan Africa. Journal of Economic Studies, 2020
FDI accelerates economic growth when inflation and private sector credit are below their thresholds while population growth is above its threshold level. This evidence is robust to different specifications.
Macroeconomic Indicators and Capital Market Performance: Are the links sustainable? with F. Olokoyo & L. Abiola Cogent Business and Management, 2020
Exchange rate, GDP growth rate and foreign capital flows are positively related with the stock market whereas the link is negative for interest rate, inflation and trade. Adjustments to equilibrium occurs with is a deviation.
Inflation and FDI in Industrialized & Developing Economies, joint with K. Agudze. International Review of Applied Economics, 2020
Inflation starts to reduce FDI inflows to industrialized countries even before reaching the well-known 2% target because providers of FDI have objectives different from those of countries' economic managers.
Financial Reforms, Capital Investment and Financial Intermediation in China. South Asian Journal of Macroeconomics and Public Finances, 2019
While changes in capital formation supported financial intermediation, financial reform has no established relationship with financial intermediation in China.
Does Government Spending Drive the Real Exchange Rates in Sub-Saharan Africa? African Development Review, 2019
Government spending contributes to real exchange rates in Sub-Saharan Africa, albeit composition has mixed effects on real exchange rates in the long- and short-run.
The Transfer Problem Surfaces in SSA: Net Foreign Assets, Financial Liberalization, Real Exchange Rates. Review of Economic Analysis, 2019
Evidence of transfer effects exist in Sub-Saharan Africa, i.e. increases in Net Foreign Assets appreciate real exchange rates. These effects decrease with increases in trade openness and become a real depreciation for financially liberalized SSA countries.
Capital Flows and Domestic Investment – New Evidence from OPEC Countries, joint with K. Olawole. Journal of Financial Economic Policy, 2019
Capital flows crowd out domestic investment in OPEC countries, except in Angola and Kuwait. Disaggregated capital flows, case in point FDI, also crowd out domestic investment. OPEC countries need to enhance domestic outcomes and improve self-reliance.
The Impact of Macroeconomic Variables on Bank Performance in Nigeria, joint with F. Olokoyo, L. Abiola and C. Yinka-Banjo. Savings and Development, 2019
External Debt and Current Account Adjustments – The Role of Trade Openness. Cogent Journal of Economics and Finance Research, 2018
Current account deficits are influenced by external debt in Sub-Saharan Africa, with this influence mostly felt by countries with high trade openness.
Monetary Model of Exchange Rate Determination under Floating and Non-Floating Regimes. China Finance Review International, 2018
Exchange rate regimes determine the direction of relationship between monetary fundamentals and exchange rates in Sub-Sahara African countries.
Sources of Unusually High Current Account Fluctuations in 5 of 37 Developed Economies. Turkish Economic Review, 2017. Invited submission
5 developed economies have distinctly large current account fluctuations. Temporary shocks account for most of these fluctuations. Singapore data support the two-good intertemporal model as external supply and demand shocks account for its fluctuations.
Working Papers
Oil Prices and Currency-Hedging Behavior
Interconnected Networks of Deviations from Covered Interest Parity, joint with D. Ahelegbey