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The asymmetric response of exchange rate to interest rate differential is empirically examined for the MINT countries.Consequently, we formulate a nonlinear autoregressive distributed lag model that accounts for asymmetries andstructural breaks. We find that exchange rate responds asymmetrically to interest rate differential both in the long runand short run. Our results lend support to the sticky price hypothesis to justify the use of conventional policy tools forshort run stabilisation. The same is established for the long run to drive in foreign investment flows. We arguecontrarily for unconventional policies in Nigeria to correct short run fluctuations and to encourage long run investmentflows given the positive relationship obtained in both time horizons.
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