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An empirical analysis of the impact of floating exchange rate on balance of payment in Nigeria (1986 - 2016)

Turkish Economic Review

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Title An empirical analysis of the impact of floating exchange rate on balance of payment in Nigeria (1986 - 2016)
 
Creator GATAWA, N. M.;

Department of Economics

Usmanu Danfodiyo University, Sokoto, Nigeria


ELIJAH, Sunday;

Department of Economics

Federal University, Gusau, Nigeria


UMAR, Mohammed; Usmanu Danfodiyo University, Sokoto
 
Subject Floating exchange rate; Balance of payments; VECM.
F10; F30; F31.
 
Description Abstract. This paper empirically investigates the impact of floating exchange rate on balance of payment in Nigeria during 1986 – 2016. Unit root test, cointegration test, VEC Granger causality/Exogeneity Wald test and Vector Error Correction Model (VECM) were econometric tools used to establish the relationship between exchange rate and balance of payment. The results showed a positive and statistically significant relationship in both short-run and long-run between balance of payment and exchange rate of the Nigerian Economy during the period under review. The VEC Granger Causality/Block Exogeneity further revealed that the major determinants of exchange rate are real GDP and money supply. It further reveals that the nexus among the variables runs from government expenditure to real GDP and money supply to exchange rate, and then to Balance of Payment. Therefore it was recommended amongst other things that the policy of exchange rate depreciation should be maintained but with government intervention guide. Government through Central Bank of Nigeria (CBN) should apply expenditure reducing monetary policies through money supply and domestic credit to promote favourable BOT which invariably stabilizes BOP.Keywords. Floating exchange rate, Balance of payments, VECM.JEL. F10, F30, F31.
 
Publisher Turkish Economic Review
Turkish Economic Review
 
Contributor —
 
Date 2018-10-26
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
—
 
Format application/pdf
 
Identifier http://www.kspjournals.org/index.php/TER/article/view/1751
10.1453/ter.v5i3.1751
 
Source Turkish Economic Review; Vol 5, No 3 (2018): September; 285-307
Turkish Economic Review; Vol 5, No 3 (2018): September; 285-307
2149-0414
 
Language eng
 
Relation http://www.kspjournals.org/index.php/TER/article/view/1751/1761
 
Rights Copyright (c) 2018 Turkish Economic Review
http://creativecommons.org/licenses/by-nc/4.0