Browsing by Author "Gunawardhana, C.S."

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Behavior of Exchange Rate and its Impact on Other Macroeconomic Variables: Perspective of the Sri Lankan Economy
(Faculty of Commerce and Management Studies, University of Kelaniya, 2021) Damayanthi, N.M.M.; Gunawardhana, C.S.
Understanding the behavior of Real Effective Exchange Rate (REER) of Sri Lanka with other macroeconomic variables is an important element which directly link with the external sector stability. With the aim of understanding the behavior of exchange rate based on external sector dynamics, the study performs the Vector Auto Regression (VAR) model as a tool covering the period from January 2010 to March 2019. The findings of the research revealed that the behavior of exchange rate with net intervention to foreign exchange market by the Central Bank of Sri Lanka (CBSL), the worker’s remittances, net of external debt disbursement and external debt services payments, changes in policy rates of United States, changes in international crude oil prices and earnings from tourism are in line with the theoretical expectations which is positively influence on exchange rate in a country. However, research findings were contrary with the theoretical expectations of behavior of inflation, domestic interest rates and net exports. Even though the depreciated domestic currency may result in increasing net exports, Sri Lanka has been a net importing economy due to higher consumption driven economic activities. This has resulted further depreciation of domestic currency. In conclusion, the domestic currency is depreciated due to lack of robustness of the variables that cause appreciation of domestic currency. Therefore, economic fundamentals should be prudently handled by the policy makers in order to preserve the optimal level of the exchange rate of the country.
Determinants of Foreign Direct Investment and its impact on Economic Growth: Evidence from South Asian Association for Regional Cooperation (SAARC) Countries
(International Conference on Business and Information (ICBI – 2019), [Accounting, Finance and Economics], Faculty of Commerce and Management Studies, University of Kelaniya Sri Lanka, 2019) Gunawardhana, C.S.; Damayanthi, N.M.M.
It is argued that Foreign Direct Investment (FDI) inflows benefits the recipient countries by providing capital, technology and long term foreign exchange and bridges savings and investment gap of the recipient country. Further, FDI provides an important role in achieving economic growth in the developing countries. This paper identifies the influential factors that determine FDI inflow in the South Asian Association for Regional Cooperation (SAARC) Countries and empirically investigates the relationship between economic growth and FDI. Further, this study uses time series data from 1980 to 2018 and considered the size of the economy, economic growth, potential of the host market, economic stability, and degree of openness, income level and institutional developments in the host country to identify influential factors to determinants of FDI. Analysis reveal that countries with larger Gross Domestic Product (GDP) growth rate can successfully attract FDI and FDI on the other hand, significantly affect economic growth of a country. In addition, it was found that current account balance, financial deepening and trade openness significantly play a crucial role in determining the FDI flows into recipient countries.