Kenny S, Victoria (2019): Exchange Rate Management and Economic Growth: An FMOLS Approach.
PDF
MPRA_paper_93125.pdf Download (255kB) |
Abstract
Exchange rate instability is menacing economic growth in Nigeria. Fluctuations, whether positive or negative, increases risk and discourages trade hence is not desirable for the economy. This study therefore examine exchange rate fluctuation during the different exchange rate regime, its impact on economic growth rate to determine which of the exchange rate regime significantly influence economic growth in Nigeria covering periods from 1981 to 2015. The method of data analysis employed Augmented Dickey Fuller (ADF) Unit Root Test, Co-integration test, Fully Modified Ordinary Least Square (FMOLS) estimation technique and diagnostic tests. The FMOLS result revealed that exchange rate, external reserve, money supply and capital input have significant impact on the economic growth of Nigeria; whereas labour shows no significant impact on economic growth in the long run. Also, the dummy variable indicates a negative insignificant coefficient which suggests that fixed exchange rate wouldn’t enhance the economy of Nigeria in the long run. This study concludes that sustained utilization of manage floating exchange rate regime in the country would significantly improve the domestic production leading to increase in the stock of external reserve in Nigeria. Therefore, the high frequency of change in exchange rate regime by the Central Bank of Nigeria (CBN) should be discouraged because exchange rate regime signifies a shock for currency markets. Likewise, the Federal government strives to accumulate external reserves and discourage the incessant sharing of the foreign earnings from crude oil exports between the federal, state and local governments.
Item Type: | MPRA Paper |
---|---|
Original Title: | Exchange Rate Management and Economic Growth: An FMOLS Approach |
Language: | English |
Keywords: | Exchange Rate, Economic Growth, External Reserves, Currency Management |
Subjects: | E - Macroeconomics and Monetary Economics > E0 - General |
Item ID: | 93125 |
Depositing User: | Samuel Okafor |
Date Deposited: | 08 Apr 2019 03:54 |
Last Modified: | 26 Sep 2019 08:22 |
References: | REFERENCES A., A. K. (2010). exchange rates and the consumer price index in nigeria. journal of emerging trends in economics and management sciences, 114-120. Adeniran, J., & Yusuf, S. A. (2014). The impact of exchange rate fluctuation on the economic growth: An empirical investigation. International Journal of Academic Research in Business and Social Sciences, 8, 226-232. Adetiloye, K. (2010). Exchange rates and the consumer price index in nigeria. Journal of emerging trends in economics and management sciences, 114-120. Adeyemi, G., & Olawale, A. (2014). The Impact of Exchange Rate o Economic Growth in Nigeria (1980-2012). Australian Journal Of Business and Management Resaerch, 9-18. Ajayi, H. (1995). Structure of Nigeria’s Exchange Rate Policy. A focus on exports. Bullion Publication. Akeju, F. K. (2014). Real exchange rate, terms of trade and economic growth in Nigeria (1980-2012). Journal of Economic Theory, 8(2), 19-23. Akinbobola, T. O., & Oyatayo, O. J. (2010). Econometric analysis of real exchange rate and domestic output growth in Nigeria. international Journal of Academic Resources, 2, 339-343. Aliyu, S. (2011). An application of behavioural equilibrium exchangerRate to Nigeria. Central Bank of Nigeria Occasional paper, 41. Amaghionyeodiwe, L., & Osinubi, T. (2005). Determinants of choice of Exchange Rate Regimes in Nigeria. Pakistan Economic and Social Review, 70-92. Anubha, D. (2013). Real Effective Exchange Rate and Manufacturing Sector Performance: Evidence from Indian Firms. Anyanwu, F., Ananwude, A., & Okoye, N. (2017). Exchange Rate Policy and Nigeria's Economic Growth: A Granger Causality Impact Assessment. Ayodele, T. (2014). An empirical evaluation of the impact of exchange rate on the Nigeria Economy. Journal of Economics and Sustainable Development, 5(8), 11-19. Campbell, O. A. (2010). Foreign exchange market and monetary management in Nigeria. Journal of Emerging Trends in Economics and Management Sciences, 1(2), 100-105. Dada, E. A., & Oyeranti, O. A. (2012). Exchange rate and macroeconomic aggregation in Nigeria. Journal of Economic sustainable Development, 3, 94-100. David, U., & Ameh. (2010). The Effect of Exchange Rate fluctuations on Nigeria Manufacturing Sector. African Journal of Business Management, 2990-2997. Ekaette, U. J. (2002). Monetary policy and exchange rate stability. Lagos. Eme, O., & Johnson, A. A. (2010). Effects of exchange rate movements on economic growth in Nigeria. CBN Journal of Applied Statistics, 2(2), 29-44. Engle, R. F., & Granger, C. W. (1987). Co-integration and Error Correction: Representation estimation and testing (Vol. 55). Eze, T. C., & Okpala, C. S. (2014). Quantitative analysis of the impact of exchange rate policies on Nigeria’s economic growth: A test of stability of parameter estimates. International Journal of Humanities and Social Science, 4(7), 264-275. Fapetu, O., & Oloyede, J. A. (2014). Foreign exchange management and the Nigerian economic growth (1960 – 2012). European Journal of Business and Innovation Research,, 2(2), 18-30. Gujarati, D. N. (n.d.). Basic Econometrics. London: McGraw-Hiu Int. Iuhia, I., & Bogdan, C. (2012). Exchange rate regimes and economic growth in Central and Eastern European Countries. Procedia Economics and Finance, 3, 17-24. Ibhagui, Oyakhilome, 2015. "Development Accounting of Africa’s Largest Economies – Explaining Differences in Income Levels," MPRA Paper 89081, University Library of Munich Ibhagui, Oyakhilome, 2017. "How Does Foreign Direct Investment Affect Growth in Sub-Saharan Africa? New Evidence from Non-threshold and Threshold Analysis," MPRA Paper 85784, University Library of Munich, Germany. Ibhagui, O, 2017. "Linking Fiscal Policy and External Competitiveness in Sub-Saharan Africa – Does Government Spending Drive The Real Exchange Rate in Sub-Saharan Africa,"MPRA Paper 77291, University Library of Munich Ibhagui, O. (2017).Value and wealth creation : stylized evidence from Nigeria's listed cement companies AfricaGrowth Agenda, Volume 2017 Number 4, Oct/Dec 2017, p. 12 – 17 Ibhagui, O., (2018). The Monetary Model of CIP Deviations, Working Paper Ibhagui, O, 2018 Interrelations Among Cross-Currency Basis Swap Spreads: Pre-and Post-Crisis Analysis. SSRN Ibhagui, O. 2018. External debt and current account adjustments: The role of trade openness Cogent Economics and Finance, Volume 6, 2018 - Issue 1 Ibhagui, O W. & Olokoyo, Felicia O., 2018. "Leverage and firm performance: New evidence on the role of firm size," The North American Journal of Economics and Finance, Elsevier, vol. 45(C), pages 57-82. Ibhagui, Oyakhilome W., 2019. "Does the long-run monetary model hold for Sub-Saharan Africa? A time series and panel-cointegration study," Research in International Business and Finance, Elsevier, vol. 47(C), pages 279-303 Ibhagui, O., (2019). Eurozone Real Output and Covered Interest Parity Deviations: Can Stronger Real Output Lessen the Deviations? Working Paper Ibhagui, O, 2019. "Wider Covered Interest Parity Deviations and Lower Stock Returns: Evidence from the Eurozone,"MPRA Paper 92363, University Library of Munich Kassim, L. 2014. Trade liberalisation and the balance of payments in sub-saharan africa: a pooled mean group approach. Working Paper Kassim, L. 2013. "The Impact of Trade Liberalisation on Export Growth and Import Growth in Sub-Saharan Africa," Studies in Economics 1310, Working Paper Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297. Oyakhilome W I (2010): Application of teh Kalman Filter to Interest Rate Modelling. Essays towards the AIMS Postgraduate Diploma 2009-10 Oyakhilome, W I, 2018. Monetary Model of Exchange Rate Determination under Floating and Non-Floating Regimes, China Finance Review International Oyakhilome, I. 2017. "Optimal Asset Allocation of a Pension Fund: Does The Fear of Regret Matter?," Journal of Economics Library, KSP Journals, vol. 4(2), pages 130-159 Oyakhilome, I. 2017. "Understanding the sources of high current account fluctuations in 5 developed economies," Turkish Economic Review, KSP Journals, vol. 4(3), pages 250-274 Jameela, O. (2010). Exchange rate changes and output performance in Nigeria. Pakistan Journal of Social Sciences, 7(5), 379-386. Jhingan, M. (2010). International Economics (6th ed.). India: Vrinda Publications Ltd. Jongo, O. C. (2014). The impact of real exchange rate fluctuation on industrial output in Nigeria. Journal of Policy and Development Studies, 9(1), 267-277. King-George, O. (2013). The effect of exchange rate fluctuation on the Nigeria manufacturing sector (1986-2010). Journal of Research in Business and Management, 27-30. Lawal, E. (2016). Effect of exchange rate fluctuations on manufacturing sector output in Nigeria. Journal of Research in Business and Management, 4(1), 33-40. Mapenda, R. (2010). Exchange rates behaviour in Ghana & Nigeria: Is there a Misalignment? Department of Economics and Economic History Rhodes University , 100-108. Mehdi, B., Arezoo, N., & Alireza, J. (2014). The effect of exchange rate fluctuations on economic growth considering the level of development of financial markets in selected developing countries. Asian Economic and Financial Review, 516-528. Montiel, P. J. (1999). Determinants of the long-run equilibrium real. In L. E. Hinkle, & P. J. Montiel, Exchange rate misalignment: concepts and measurement for developing countries. New York: Oxford . Mordi, C. N. (2006). Challenges of exchange rate volatility in economic management in Nigeria. CBN bullion, 30(5), 17-25. Nkang, N. M., Abang, S. O., Akpan, O., & Ofon, K. J. (2006). Co-integration and Error correction modelling of agricultural export trade in Nigeria: The Case of Cocoa. Journal of Agriculture and Social Sciences, 249-255. Nnanna, P., & Alireza, N. (2015). Exchange rate fluctuation and sustainable economic growth in Nigeria: VAR Approach. Journal of Economics and Sustainable Development, 6(13), 17-28. Oladele, A. (2015). Foreign Exchange Market and the Nigeria Economy. Foreign Exchange, 6(4). Oladipupo, A. O., & Onotaniyohuwo, F. O. (2011). Impact of exchange rate on balance of payment in Nigeria. African research review: An international multidisciplinary Journal, 5(4), 74-85. Olowe, R. (2009). Modelling Naira/Dollar exchange rate volatility: Application of Garch and asymmetric models. International Review of Business Research Papers, 5(3), 376-397. Opaluwa, D., Umeh, J. C., & Abu, A. (2010). The effect of exchange rate fluctuation on the Nigerian manufacturing sector. African Journal of Business Management, 4(14), 2993-2997. Owolabi, A., & Adegbite, T. (2012). The effect of foreign exchange regimes on industrial growth in Nigeria. Global Advanced Research Journal of Economic, Accounting and Finance, 1(1), 2-10. Oyejide, & Udun. (2010). Exchange rate regime and economic growth: Evidence from Developing Asian and Advanced European Economies. Retrieved from www.cgu.edu.include/ huang Todaro, & Smith. (2012). Economic Development. England: Pearson Education Limited. Umeora, C. E. (2013). Accumulation of external reserves and effects on exchange rates and inflation in Nigeria. International Business and Management, 6(2), 106-113. Vieira, F., Holland, M., da Silva, C., & Bottecchia, L. (2013). Growth and exchange rate volatility: A panel data analysis. Applied Economics, 45(26), 3372-3742. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/93125 |