Short‐run and long‐run determinants of exchange rate fluctuations: A tale of the Dollar and the Naira

Evans, Olaniyi (2025): Short‐run and long‐run determinants of exchange rate fluctuations: A tale of the Dollar and the Naira. Published in: 5-Profz Working Paper Series No. 202001

Abstract

The study provides evidence on the effects of changes in oil price, inflation, interest rate, budget balance, economic growth, external debt, domestic investment, and current account balance on exchange rate fluctuations in using the ARDL approach for the period 1970-2015 for the case of the Naira and Dollar. The study shows that changes in oil price, inflation, the current account and domestic investment have significant effects on exchange rate fluctuations both in the short and long run. Changes in external debt has significant effects on exchange rate fluctuations only in the long run. Changes in interest rate, budget balance and economic growth have significant effects on exchange rate only in the short run. In other words, a significant proportion of the high volatility of exchange rate in Nigeria is as a result of changes in oil price, inflation, interest rate, budget balance, economic growth, external debt, domestic investment, and current account balance. The logical conclusion is that in order to stabilize exchange rate in Nigeria, measures should be aimed at diversifying the economy, improving the current account position as well as reducing inflation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Naira-Dollar exchange rate fluctuations, Oil Price, Debt, Inflation, Interest, Growth, Investment, Budget, Current Account, ARDL
• Subjects: F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M21 - Business Economics

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