THE IMPACT OF EXCHANGE RATE VOLATILITY ON NIGERIA ECONOMIC GROWTH
ABSTRACT
THIS PAPER INVESTIGATES THE IMPACT OF VOLATILITY OF EXCHANGE RATES ON THE NIGERIA ECONOMY. AFTER A SHORT INTRODUCTION OF THE UNDERLYING THEORIES AND EMPIRICAL LITERATURE, THE RELATIONSHIP BETWEEN THESE TWO VARIABLES IS ESTIMATED. THE MODEL FORMULATED DEPICTS REAL GDP AS THE DEPENDENT VARIABLE WHILE EXCHANGE RATE (EXR), BALANCE OF PAYMENT (BOP) OIL REVENUE (OREV) AND INFLATION (INF) ARE INDEPENDENT VARIABLES. THESE DATA WERE SOURCED AND EXTRACTED FROM CBN STATISTICAL BULLETIN. WE EMPLOY THE JOHANSEN CO-INTEGRATION ESTIMATION TECHNIQUES TO TEST FOR THE SHORT AND LONG RUNS EFFECT OF THE VARIABLES USED. THE RESULTS OBTAINED ARE POSITIVE BUT ARE INSIGNIFICANT, AND DO NOT SUPPORT THE POSITION THAT EXCESSIVE VOLATILITY OR SHIFTING OF EXCHANGE RATE REGIMES HAS PRONOUNCED EFFECTS ON THE ECONOMY. THESE RESULTS ARE CONSISTENT WITH WHAT WE OBTAIN FROM THE IMPULSE RESPONSES. WE RECOMMEND THAT GRAFT SHOULD BE TACKLED FRONTALLY IN THE OIL SECTOR TO ENSURE BETTER UTILIZATION OF OIL REVENUE. ALSO THE MONETARY AUTHORITIES SHOULD PURSUE POLICIES THAT WOULD CURB INFLATION AND ENSURE EXCHANGE RATE STABILITY FOR A SUSTAINABLE ECONOMIC GROWTH IN NIGERIA.
THE IMPACT OF EXCHANGE RATE VOLATILITY ON NIGERIA ECONOMIC GROWTH
