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This paper examines the extent to which exchange rate volatility (ERV) is crucial for small island economies. These economies by their very nature and size tend to be net importers and highly dependent on trade for their economic survival. The island of Mauritius is used as a case study.

A GARCH model has been utilized using yearly data for the period 1993–2022. The ARDL bounds cointegration approach has been used to determine the long run relationship between exchange rate volatility and the performance of exports. The ECM-ARDL model has been used to estimate the short-run relationships, that is the speed of adjustments between the variables under consideration.

The findings reveal that exchange rate volatility has a positive and significant effect on exports in the short run as well as in the long run. The study also finds out that export has a long-term relationship with world GDP per capita. Both the presence and degree of exchange rate volatility are important aspects for consideration in policy making.

The literature gap that this study attempts to close is one related to global impacts within the recent time horizon. Recently, numerous important events shaped the financial and economic landscape globally, including but not limited to the financial crisis of 2008 and the COVID-19 pandemic in 2019. Both these events stressed the global volume of trade and the exchange rate markets, and these events affects small islands comparatively more given their heavy dependence on international trade for economic development, albeit economic survival.

The purpose of this paper is to supplement the literature on the determinants of foreign direct investment (FDI) by bringing new evidences for the case of a successful FDI recipient country in Africa, namely Mauritius.

The determinants of FDI are examined by specifying a reduced‐form specification for a demand for inward direct investment function, and by making use of a dynamic framework. In the absence of cointegration, a differenced vector autoregressive (DVAR) model is used to capture the short‐run dynamics of the growth rate of the different specified variables.

The most instrumental factors appear to be trade openness, wages and the quality of labour in the country. Size of the market is reported to have a relatively lesser impact on FDI, probably related to the limited size of the population and the domestic market on the one hand and the good export opportunities from Mauritius on the other. The significant coefficient of the lagged dependent variable suggests the presence of dynamism in the system.

The paper is based mainly on the case study of a single country and therefore, imposes limitations on the generalizability of some of the findings to the region. As such, availability of a longer time series would have been better.

Research findings suggest that in addition to giving fiscal investment incentives, the government should also ensure that labour costs remain competitive and do not increase relatively faster than other FDI recipient countries. Moreover, the state should realize that labour cost alone is not a stand‐alone ingredient and that productivity of workers remains a big challenge. As such, adoption of appropriate but prudent measures in further opening up of the economy to international trade remains an interesting avenue given the limited potential for foreign direct investors.

An overwhelming number of studies have focused on samples of developed countries with relatively very few works conducted on the determinants of FDI to Africa. This paper attempts to supplement the related literature and additionally uses rigorous time series analysis to model the dynamism in FDI modelling, an element largely ignored by past studies.

The purpose of this paper is to test the hypothesis that there exists a positive link between financial development and economic growth in island economies.

To study this relationship both static and dynamic panel data techniques (GMM) are used for a sample of 20 island economies over a period of 22 years.

Results from the fixed effect estimates show that financial development has a positive contribution on the output level of the islands. The positive link is also validated using GMM panel estimates and interestingly the presence of dynamics in the modelling is detected.

This research narrows the gap that exists in literature as much of the research in this field deals with only developed countries and very few with developing countries. To the best of the authors' knowledge, no studies have looked into a set of island economies – this study is the first of its kind.

The purpose of this paper is to determine cause and effect relationship between foreign direct investment (FDI) and economic growth (gross domestic product (GDP) taken as proxy) for Brazil, Russia, India, China and South Africa (BRICS nations) individually for the period 1992-2013. Also, the study tries to explore the reasons behind the linkage between FDI and GDP by estimating a linear regression model consisting of both macro-economic and institutional variables.

Johansen cointegration technique followed by vector error correction model (VECM) and standard Granger causality test are employed to investigate the causal linkage between FDI and GDP. To delve into the reasons behind this linkage, an ordinary least square (OLS) technique is also applied to test the linear regression model consisting of net FDI inflows as dependent variable and nine macro- economic and institutional variables. Residual diagnostics is also conducted using Breusch-Godfrey Lagrange Multiplier test for diagnosing the problem of serial correlation, Breusch-Pagan-Godfrey test for examining heteroskedasticity and Jarque Bera test for verifying the normality of residuals.

The Johansen cointegration result establishes a single cointegrating vector (long run relationship) between FDI and GDP for India, China and Brazil. After proving a cointegration, VECM results revealed that there exists unidirectional long run causality running from GDP to FDI in case of Brazil, India and China. Also, it is confirmed that there exists short run causality between FDI and GDP in China, i.e. the past lags of FDI jointly impact the value of GDP. However, for Russia and South Africa, where there is no cointegration in the long run, standard Granger causality test is conducted which reveals that in both the nations, FDI and GDP are independent of one another. The results of OLS technique reveal different country-specific factors causing this linkage between FDI inflows and economic growth.

Various researchers in the past have examined this issue of linkage between FDI and GDP in the context of various developing or developed nations. This reveals a gap in the existing literature pertaining to this causal linkage in the context of the BRICS. Thus, this study fills this gap by analyzing not just this causal nexus with the help of VECM and Granger causality techniques but also tries to explore further the reasons for such strong/weak/no link with the help of fitting a regression model which comprises of both macro-economic and institutional country-specific variables influencing this causation.

The purpose of this paper is to find out the impact of real exchange rate on foreign direct investment (FDI) in Mauritius.

Autoregressive distributed lag time series methodology is used.

Real exchange rate depreciation enhances inflows of FDI in both the short and long run.

The research is original, and data used are from official sources.