This document examines the relationship between foreign exchange dynamics and Nigeria's balance of payments using time series data from 1980-2008. Regression analysis found that exchange rate and external reserves positively predicted variations in the current and capital accounts, while external debt negatively predicted variations. Specifically, a favorable exchange rate and higher external reserves stimulated trade and investment, while higher external debt indicated economic weakness. The study concludes it is important for Nigeria to closely manage exchange rates, reserves, and debt to maintain a stable and competitive economy.
Asymmetric Analysis of Exchange Rates Volatility: Evidence from Emerging EconomyIOSRJBM
The primary objective of this study is to empirically establish the level of volatility persistence and ascertain the presence of asymmetric effect on the three segment of the Nigerian foreign exchange market (Inter-bank Foreign Exchange Market (IFEM), bureau de change (BDC) and Wholesale Dutch Auction System (WDAS)). Asymmetric Threshold Generalized Authoregressive Conditional Heteroscadasticity (TGARCH) approach was adopted in the research methodology for the empirical analysis to capture the simultaneous estimation of the mean and the conditional variance in 1,262 sample observations. Generally, this study produced some interesting findings: first, it reveals that naira to US dollar nominal exchange rate volatilities were found to be persistent in all the market segments. Second, the exchange rate volatility in the interbank is persistent and explosive; while the volatilities in the BDC and WDAS market are high and moderate, respectively. This means that the BDC segment of the Nigerian foreign exchange market is less volatile than the interbank market segment even when the interbank segment of the market is more funded with foreign exchange from autonomous and official sources. Additionally, it is evident that interbank segment reacts more to past shocks of the foreign exchange market. Finally, the study also confirms the existence of asymmetric effect in the Nigerian foreign exchange market. The practical implication of these findings is that it raises a policy concerns for the regulators of interbank foreign exchange transaction because the finding of this study signals liquidity squeeze in the market and it is a disincentive to international investors and market players. This is not unconnected to trend seeking and round tripping behavior.
After the fall of Bretton Woods System, exchange rates become the focus of researchers and politicians. When a floating exchange rate system was started researchers investigated the impact of exchange rate volatility on international trade but the development of derivative instruments changed the researchers focus from currency volatility towards the impact of currency appreciation or depreciation on international trade. The main objective of this research was to investigate the short run and long run relationship between Turkey’s merchandise trade deficit and real effective exchange rate. The monthly data was collected from Central Bank of Republic of Turkey from March 2005 to September 2017. Autoregressive distributed lag (ARDL) approach and Error correction model (ECM) was used for the analysis. The finding shows that the variables have long run relationship but it is not significant at 5% significance level. The short run model also shows the insignificant results. These findings have the following policy implication: Turkey cannot improve the merchandise trade deficit by devaluating its currency.
This document summarizes a research study investigating the interaction between Nigeria's official and parallel foreign exchange markets between 1980-2012. The study aims to determine if changes in the official exchange rate transmit volatility to the parallel market rate, and if official rates can be used to control parallel rates.
The introduction provides background on Nigeria's dual exchange rate system and issues like shortages that have led to the parallel market's growth. It also outlines the study's objectives to analyze the relationship and transmission between the two markets.
The methodology section describes tests to be used like unit root, Q, BDS and GARCH tests to analyze linear dependence, volatility and transmission. The results will help determine if interactions follow an exchange rate pass-
This document summarizes a study that uses a monetary model to examine the link between monetary factors and Nigeria's balance of payments from 2007 to 2018. The study estimates a balance of payments model using two-stage least squares to control for endogeneity. The results show that domestic credit is statistically significant and negatively related to foreign reserve assets, indicating that balance of payments is a monetary phenomenon in Nigeria. Specifically, the velocity of money circulation is approximately 120% and the marginal propensity to import is around 14%. The study recommends that monetary authorities consider using domestic credit to manage balance of payments disequilibriums. It also argues that increasing domestic credit can boost the economy while marginally decreasing foreign reserves through higher imports.
Financial development, trade openness and economic growth evidence from sulta...Alexander Decker
This document summarizes a journal article that empirically investigates the relationship between financial development, trade openness, and economic growth in the Sultanate of Oman from 1972 to 2012. It finds evidence of cointegration between the three variables. Specifically, it finds unidirectional causality from economic growth to financial development, and from trade openness to the other two variables. Variance decomposition analyses show that trade openness shocks are an important source of variability for GDP and financial development in Oman.
The paper aims to see the effect of Nominal, Real (External) and Effective Exchange rates (EER) of the U.S dollar on its Terms of Trade with two of its APEC trading partners Australia and New Zealand for the period 1991 to 2010. For analysis, the whole values, percentage changes and relationships between Nominal, Real, EER and Terms of Trade of U.S with the two countries has been taken into consideration. In order to fully access the relationship between the EER and TOT of the U.S with the two trading partners, the Classical Regression analysis is used. It was found that the Real Exchange rate was overvalued as compared to the Nominal Exchange Rate. It was also found that when compared to Nominal exchange rate, Real exchange rate is more effective in explaining the TOT. The Real AUD/USD had both short run and long run impacts on the TOT of U.S.A with Australia but the Real NZD/USD had no impact on the TOT of U.S.A with New Zealand. The EER has been found to be the most effective in determining the TOT balance. The regression analysis showed a regression function of “Terms of Trade= -122.026 + 2.1 Effective Exchange Rate”. The relationship is found by coefficient correlation (r) and there is found to be a positive and strong relationship between the two variables. The 𝑟2 value shows that although some values of the TOT are caused by the EER, there are also other variables that might be influencing the EER as well. The t-values show that the values of β0 and β1 are significant. Also the F-test confirms the overall significance of the model and terms the results as authentic.
The main purpose of this study is to investigate the validity of Marshall-Lerner condition and the existence of J curve for the Turkish economy. Because of transition to the floating exchange rate regime in 2001, the analyzing period has been chosen as 2003-2016 to use monthly data for the related variables. After conducting unit- root and cointegration tests, the estimated VECM results show that Marshall- Lerner condition holds for the Turkish case. On the other hand, estimated VECM produces impulse- response functions that prove the existence of J curve for the Turkish economy in the long run.
This document discusses testing the validity of the Marshall-Lerner condition in the Ethiopian economy. The author analyzes the effects of devaluation on Ethiopia's trade balance and whether devaluation improves the trade balance by satisfying the Marshall-Lerner condition. The study estimates import and export equations and finds that devaluation has an insignificant impact on both imports and exports in Ethiopia. It also finds that the sum of the import and export elasticities is less than one, meaning the Marshall-Lerner condition does not hold. The results indicate there is a long-run relationship between exports, exchange rates, and world income as well as imports, exchange rates, and domestic income.
Asymmetric Analysis of Exchange Rates Volatility: Evidence from Emerging EconomyIOSRJBM
The primary objective of this study is to empirically establish the level of volatility persistence and ascertain the presence of asymmetric effect on the three segment of the Nigerian foreign exchange market (Inter-bank Foreign Exchange Market (IFEM), bureau de change (BDC) and Wholesale Dutch Auction System (WDAS)). Asymmetric Threshold Generalized Authoregressive Conditional Heteroscadasticity (TGARCH) approach was adopted in the research methodology for the empirical analysis to capture the simultaneous estimation of the mean and the conditional variance in 1,262 sample observations. Generally, this study produced some interesting findings: first, it reveals that naira to US dollar nominal exchange rate volatilities were found to be persistent in all the market segments. Second, the exchange rate volatility in the interbank is persistent and explosive; while the volatilities in the BDC and WDAS market are high and moderate, respectively. This means that the BDC segment of the Nigerian foreign exchange market is less volatile than the interbank market segment even when the interbank segment of the market is more funded with foreign exchange from autonomous and official sources. Additionally, it is evident that interbank segment reacts more to past shocks of the foreign exchange market. Finally, the study also confirms the existence of asymmetric effect in the Nigerian foreign exchange market. The practical implication of these findings is that it raises a policy concerns for the regulators of interbank foreign exchange transaction because the finding of this study signals liquidity squeeze in the market and it is a disincentive to international investors and market players. This is not unconnected to trend seeking and round tripping behavior.
After the fall of Bretton Woods System, exchange rates become the focus of researchers and politicians. When a floating exchange rate system was started researchers investigated the impact of exchange rate volatility on international trade but the development of derivative instruments changed the researchers focus from currency volatility towards the impact of currency appreciation or depreciation on international trade. The main objective of this research was to investigate the short run and long run relationship between Turkey’s merchandise trade deficit and real effective exchange rate. The monthly data was collected from Central Bank of Republic of Turkey from March 2005 to September 2017. Autoregressive distributed lag (ARDL) approach and Error correction model (ECM) was used for the analysis. The finding shows that the variables have long run relationship but it is not significant at 5% significance level. The short run model also shows the insignificant results. These findings have the following policy implication: Turkey cannot improve the merchandise trade deficit by devaluating its currency.
This document summarizes a research study investigating the interaction between Nigeria's official and parallel foreign exchange markets between 1980-2012. The study aims to determine if changes in the official exchange rate transmit volatility to the parallel market rate, and if official rates can be used to control parallel rates.
The introduction provides background on Nigeria's dual exchange rate system and issues like shortages that have led to the parallel market's growth. It also outlines the study's objectives to analyze the relationship and transmission between the two markets.
The methodology section describes tests to be used like unit root, Q, BDS and GARCH tests to analyze linear dependence, volatility and transmission. The results will help determine if interactions follow an exchange rate pass-
This document summarizes a study that uses a monetary model to examine the link between monetary factors and Nigeria's balance of payments from 2007 to 2018. The study estimates a balance of payments model using two-stage least squares to control for endogeneity. The results show that domestic credit is statistically significant and negatively related to foreign reserve assets, indicating that balance of payments is a monetary phenomenon in Nigeria. Specifically, the velocity of money circulation is approximately 120% and the marginal propensity to import is around 14%. The study recommends that monetary authorities consider using domestic credit to manage balance of payments disequilibriums. It also argues that increasing domestic credit can boost the economy while marginally decreasing foreign reserves through higher imports.
Financial development, trade openness and economic growth evidence from sulta...Alexander Decker
This document summarizes a journal article that empirically investigates the relationship between financial development, trade openness, and economic growth in the Sultanate of Oman from 1972 to 2012. It finds evidence of cointegration between the three variables. Specifically, it finds unidirectional causality from economic growth to financial development, and from trade openness to the other two variables. Variance decomposition analyses show that trade openness shocks are an important source of variability for GDP and financial development in Oman.
The paper aims to see the effect of Nominal, Real (External) and Effective Exchange rates (EER) of the U.S dollar on its Terms of Trade with two of its APEC trading partners Australia and New Zealand for the period 1991 to 2010. For analysis, the whole values, percentage changes and relationships between Nominal, Real, EER and Terms of Trade of U.S with the two countries has been taken into consideration. In order to fully access the relationship between the EER and TOT of the U.S with the two trading partners, the Classical Regression analysis is used. It was found that the Real Exchange rate was overvalued as compared to the Nominal Exchange Rate. It was also found that when compared to Nominal exchange rate, Real exchange rate is more effective in explaining the TOT. The Real AUD/USD had both short run and long run impacts on the TOT of U.S.A with Australia but the Real NZD/USD had no impact on the TOT of U.S.A with New Zealand. The EER has been found to be the most effective in determining the TOT balance. The regression analysis showed a regression function of “Terms of Trade= -122.026 + 2.1 Effective Exchange Rate”. The relationship is found by coefficient correlation (r) and there is found to be a positive and strong relationship between the two variables. The 𝑟2 value shows that although some values of the TOT are caused by the EER, there are also other variables that might be influencing the EER as well. The t-values show that the values of β0 and β1 are significant. Also the F-test confirms the overall significance of the model and terms the results as authentic.
The main purpose of this study is to investigate the validity of Marshall-Lerner condition and the existence of J curve for the Turkish economy. Because of transition to the floating exchange rate regime in 2001, the analyzing period has been chosen as 2003-2016 to use monthly data for the related variables. After conducting unit- root and cointegration tests, the estimated VECM results show that Marshall- Lerner condition holds for the Turkish case. On the other hand, estimated VECM produces impulse- response functions that prove the existence of J curve for the Turkish economy in the long run.
This document discusses testing the validity of the Marshall-Lerner condition in the Ethiopian economy. The author analyzes the effects of devaluation on Ethiopia's trade balance and whether devaluation improves the trade balance by satisfying the Marshall-Lerner condition. The study estimates import and export equations and finds that devaluation has an insignificant impact on both imports and exports in Ethiopia. It also finds that the sum of the import and export elasticities is less than one, meaning the Marshall-Lerner condition does not hold. The results indicate there is a long-run relationship between exports, exchange rates, and world income as well as imports, exchange rates, and domestic income.
Factors Influencing Exchange Rate: An Empirical Evidence from BangladeshMd. Shohel Rana
This study examines factors that influence exchange rate fluctuations in Bangladesh from 1987 to 2017. It analyzes the impact of remittances, GDP growth, and international trade on the real effective exchange rate. Stationarity tests and Johansen cointegration tests were used to examine the long-run relationship between the variables. VAR models and Granger causality tests found that remittances, GDP growth, and international trade significantly impact exchange rate fluctuations, explaining over 60% of variations. FMOLS tests concluded that GDP growth and international trade positively affect the exchange rate, while remittances have a negative effect. In summary, increases in GDP growth and international trade are found to increase exchange rate volatility, whereas increases in remittances decrease exchange
Using The ECM Approach between Growth of the Current Account Balance and Fore...AJHSSR Journal
ABSTRACT: The aim of this research to analyze relationship equilibrium to the long-term and short-term
between the current account balance and foreign exchange reserve. As datum from the world bankstarts from
1982 until 2018, the used methodology Error Correction Model (ECM). The result of the estimate and analysis
were the current account balance and foreign exchange reserve stationary at level with the ADF test. The
variables had relationship equilibrium for the long-term and had one-way causality. That was the foreign
exchange reserve that causesthe current account balance. For the long-term, the current account balance had
positively and not significantly to change the development of the foreign exchange reserves. From the shortterm disequilibrium relationship to the equilibrium relationship, the current account balance had negatively and
not significantly too to change the development of the foreign exchange reserves.The value of the current
account balance of Indonesia has a deficit in some periods. Itwould have a bad impact on domestic foreign
exchange reserves. To the Government, the Ministry of Trade to keep the export performance to the stability of
the current account balance surplus to increase the Indonesian economic growth.
KEYWORDS : Foreign Exchange Reserve, Current Account Balance, EC
Determinants of interest rate empirical evidence from pakistanAlexander Decker
This document summarizes a research paper that analyzes the determinants of interest rates in Pakistan. It begins with background definitions of key rate indicators like KIBOR and inflation. It then states the purpose is to study the determinants of interest rates, with the hypotheses that inflation and exchange rates have a positive impact on interest rates. The literature review summarizes several past studies on factors influencing interest rates in countries like Pakistan, Austria, and Japan. These studies examined the relationship between policy rates, market rates, inflation, and economic growth.
This paper aims to investigate the stability of money demand function for Saudi Arabian economy over the period of
2007:Q1-2018:Q4 by applying various structural break tests. The obtained results from the utilized tests reveal the
stability of money demand function. The estimated money demand function also shows the impact of income on
money demand is consistent with theory expectations in addition to the positive impact of exchange rate and interest
rate on the demand for money. Moreover, the estimated error correction model indicates that money demand needs
about 5 quarters to adjust to its equilibrium path in case it deviates from the steady state condition
This document provides an introduction and overview of a study on foreign currency reserves and their impact on economic growth in Bangladesh. It discusses the objectives of the study, which are to analyze the volume of foreign currency reserves in Bangladesh over the last ten years, identify the major sources and impacts of foreign remittances on Bangladesh's economy and balance of payments, and provide recommendations to increase foreign remittances and improve related processes. The methodology and sources of data for the study are also outlined.
Asian monetary cooperation£ºtheory and possibilityR_24
The document analyzes the theory and possibility of Asian monetary cooperation. It finds that intra-regional trade and investment in East Asia is high, meeting some conditions for an optimal currency area. However, factors like low labor mobility and differences in economic development levels mean East Asia does not fully meet optimal currency area conditions. While a single Asian currency is not currently possible, the document concludes that sub-regional monetary cooperation, such as between China, ASEAN countries, and Japan/Korea could be established as an intermediate step. In the long run, a unified Asian Monetary Union may be possible after further economic integration.
This document discusses a study examining the relationship between banking sector development and economic growth in Lebanon from 1992-2011. The study uses regression analysis to test whether greater banking sector development, as represented by factors like private credit levels and banking efficiency, leads to increased economic growth. Preliminary analysis includes a Granger causality test to determine the direction of the relationship between financial development and GDP growth. Key banking sector variables analyzed are private credit levels, interest rate spreads, banking assets, concentration levels, and deposit growth rates. The goal is to evaluate how Lebanon's banking-centered financial system impacts economic activity and development.
A Dynamic Analysis of the Impact of Capital Flight on Real Exchange Rate in N...iosrjce
This study examines the dynamic effect of capital flight on the real exchange rate of the naira.
Specifically this study seeks to investigate if a long-run relationship exists between real exchange rate and
capital flight in Nigeria. This will be done using quarterly time series data covering the period 1981 to 2009. In
this process the short-run dynamics of the interactions between the two variables will be analyzed.
Foreign financial resources inflows and stock market development empirical ev...Alexander Decker
This study empirically investigates the effects of foreign financial resource inflows on stock market development in Nigeria and Ghana between 1988-2011 for Nigeria and 1991-2011 for Ghana. Using market capitalization to GDP ratio as a proxy for stock market development and multiple linear regression analysis, the study finds that foreign direct investment, foreign portfolio investment, personal remittances, and official development assistance were positively related to stock market development in Nigeria, though official development assistance was insignificant. In Ghana, foreign direct investment, personal remittances, and external debt were negatively related to stock market development, while official development assistance was positively related. The study aims to contribute to existing literature by investigating the effects of multiple components of foreign financial inflows on stock
- The RMB's rise as an international currency is inevitable due to China's economic size and trade relationships. However, this process will be gradual rather than straightforward, described as "creeping internationalization."
- Currently, offshore RMB is primarily used for trade settlement, investment flows, and reserve management. Trade settlement in RMB is growing rapidly, led by Hong Kong, though it remains a small percentage of global trade. Investment flows are expected to drive more innovation in offshore RMB markets.
- Countries deepening economic ties with China will increase RMB holdings for strategic reasons, even if trade and investment are not yet substantial. New offshore RMB hubs will emerge alongside Hong Kong, with London and Singapore
This paper analyzes long-term data on short-term Japanese interest rates and compares them to key foreign rates to assess Japan's integration into international money markets over time. It finds that Japanese interest rates became less volatile and more closely linked to foreign rates in the inter-war period, possibly due to deeper financial integration or use of interest rates to manage external imbalances. The paper uses econometric analysis and cointegration tests to examine these relationships under changing domestic policy regimes and degrees of capital mobility. It provides a thorough review of relevant theoretical frameworks and methodology to guide the empirical analysis.
Does Misaligned Currency Affect Economic Growth? – Evidence from Croatia Nicha Tatsaneeyapan
The document examines the relationship between currency misalignment and economic growth in Croatia from 2001 to 2013. It estimates the fundamental equilibrium exchange rate of the Croatian kuna using techniques like cointegration and VAR models. The findings show the kuna was undervalued from 2000 to 2007 and overvalued from 2008 to 2013. For the whole sample period, currency misalignments Granger caused GDP growth, but no causality was found for the two sub-periods. The research also finds the misalignments over this period were relatively small.
Application of taylor principle to lending rate pass through debate in nigeri...Alexander Decker
This document summarizes research on the pass-through of policy interest rates to retail lending rates in Nigeria. It finds that pass-through is incomplete, which contradicts the Taylor principle and implications for monetary policy effectiveness. The paper also reviews literature showing that retail rates typically do not fully adjust to changes in policy rates due to factors like bank-customer relationships and asymmetric information. An incomplete pass-through can interfere with the stabilizing role of monetary policy and alter macroeconomic stability.
Demand for money in hungary an ardl approach by nikolaos dritsakisBalaji Bathmanaban
This study examines the demand for money in Hungary using quarterly data from 1995 to 2010 within an autoregressive distributed lag (ARDL) framework. The results of the bounds test confirm a stable, long-run relationship between M1 real monetary aggregate, real income, inflation rate, and nominal exchange rate. Specifically, real income has a positive impact on money demand while inflation and exchange rates have negative impacts. Stability tests also reveal a stable money demand function over the period examined, indicating M1 is a suitable intermediate target for monetary policy in Hungary.
Thirlwall’s law, given by the ratio of the rate of growth of exports to the income elasticity of imports is a key result of Balance of Payments (BOP) constrained long run growth models with balanced trade. Some authors have extended the analysis to incorporate long run net capital flows. We provide a critical evaluation on these efforts and propose an alternative approach to deal with long run external debt sustainability, based on two key features. First, we treat the external debt to exports ratio as the relevant indicator for the analysis of external debt sustainability. Second, we include an external credit constraint in the form of a maximum acceptable level of this ratio. The main results that emerge are that sustainable long run capital flows can positively affect the long run level of output, but not the rate of growth compatible with the BOP constraint, as exports must ultimately tend to grow at the same rate as imports. Therefore, Thirlwall’s law still holds.
Macroeconomic and Institutional Determinants of Capital Market Performance in...Fakir Tajul Islam
This paper examines the institutional and macroeconomic
determinants of stock market performance using data in the last 20 years starting from 1995 to 2015. In this
paper, Gross Domestic Product (GDP), Consumer Price Index (CPI), inflation rate and Foreign Direct Investment
(FDI) inflows were used as the proxy of macroeconomic determinants, whereas market capitalization, total
issued capital and market turnover of Dhaka Stock Exchange were the proxy of institutional determinants of
capital market performance.
Determinants of stock price movements in nigeria evidence from monetary varia...Alexander Decker
This document summarizes a research article that examined the determinants of stock price movements in Nigeria from 1985 to 2010. The researchers used cointegration tests and regression analysis to analyze the relationship between stock prices and various macroeconomic variables, including monetary policy factors like interest rates, exchange rates, and money supply as well as inflation and political instability. The results showed no long-run relationship between the variables, but inflation was found to be a major determinant of stock price movements in Nigeria. The study recommends that monetary authorities pay attention to changes in money supply and inflation given their impact on stock prices.
Experimental study of the change in porosity of imeri oilsand rock contaminat...Alexander Decker
This study investigated the effect of CO2 injection on the porosity of Imeri oilsand located in Nigeria. The key findings were:
- The porosity of the oilsand core sample increased up to 7.89% in the first 16 days after intermittent CO2 injection.
- After 16 days, the measured porosity started to gradually decrease, and the outer surface of the core hardened.
- The fracture pressure of the core, a measure of its hardness, increased by 30.94% after 30 days of initial CO2 injection.
- This was likely due to reactions between the CO2 and oilsand that formed cementing materials or hydrates, sealing the pores and increasing hardness.
Factors Influencing Exchange Rate: An Empirical Evidence from BangladeshMd. Shohel Rana
This study examines factors that influence exchange rate fluctuations in Bangladesh from 1987 to 2017. It analyzes the impact of remittances, GDP growth, and international trade on the real effective exchange rate. Stationarity tests and Johansen cointegration tests were used to examine the long-run relationship between the variables. VAR models and Granger causality tests found that remittances, GDP growth, and international trade significantly impact exchange rate fluctuations, explaining over 60% of variations. FMOLS tests concluded that GDP growth and international trade positively affect the exchange rate, while remittances have a negative effect. In summary, increases in GDP growth and international trade are found to increase exchange rate volatility, whereas increases in remittances decrease exchange
Using The ECM Approach between Growth of the Current Account Balance and Fore...AJHSSR Journal
ABSTRACT: The aim of this research to analyze relationship equilibrium to the long-term and short-term
between the current account balance and foreign exchange reserve. As datum from the world bankstarts from
1982 until 2018, the used methodology Error Correction Model (ECM). The result of the estimate and analysis
were the current account balance and foreign exchange reserve stationary at level with the ADF test. The
variables had relationship equilibrium for the long-term and had one-way causality. That was the foreign
exchange reserve that causesthe current account balance. For the long-term, the current account balance had
positively and not significantly to change the development of the foreign exchange reserves. From the shortterm disequilibrium relationship to the equilibrium relationship, the current account balance had negatively and
not significantly too to change the development of the foreign exchange reserves.The value of the current
account balance of Indonesia has a deficit in some periods. Itwould have a bad impact on domestic foreign
exchange reserves. To the Government, the Ministry of Trade to keep the export performance to the stability of
the current account balance surplus to increase the Indonesian economic growth.
KEYWORDS : Foreign Exchange Reserve, Current Account Balance, EC
Determinants of interest rate empirical evidence from pakistanAlexander Decker
This document summarizes a research paper that analyzes the determinants of interest rates in Pakistan. It begins with background definitions of key rate indicators like KIBOR and inflation. It then states the purpose is to study the determinants of interest rates, with the hypotheses that inflation and exchange rates have a positive impact on interest rates. The literature review summarizes several past studies on factors influencing interest rates in countries like Pakistan, Austria, and Japan. These studies examined the relationship between policy rates, market rates, inflation, and economic growth.
This paper aims to investigate the stability of money demand function for Saudi Arabian economy over the period of
2007:Q1-2018:Q4 by applying various structural break tests. The obtained results from the utilized tests reveal the
stability of money demand function. The estimated money demand function also shows the impact of income on
money demand is consistent with theory expectations in addition to the positive impact of exchange rate and interest
rate on the demand for money. Moreover, the estimated error correction model indicates that money demand needs
about 5 quarters to adjust to its equilibrium path in case it deviates from the steady state condition
This document provides an introduction and overview of a study on foreign currency reserves and their impact on economic growth in Bangladesh. It discusses the objectives of the study, which are to analyze the volume of foreign currency reserves in Bangladesh over the last ten years, identify the major sources and impacts of foreign remittances on Bangladesh's economy and balance of payments, and provide recommendations to increase foreign remittances and improve related processes. The methodology and sources of data for the study are also outlined.
Asian monetary cooperation£ºtheory and possibilityR_24
The document analyzes the theory and possibility of Asian monetary cooperation. It finds that intra-regional trade and investment in East Asia is high, meeting some conditions for an optimal currency area. However, factors like low labor mobility and differences in economic development levels mean East Asia does not fully meet optimal currency area conditions. While a single Asian currency is not currently possible, the document concludes that sub-regional monetary cooperation, such as between China, ASEAN countries, and Japan/Korea could be established as an intermediate step. In the long run, a unified Asian Monetary Union may be possible after further economic integration.
This document discusses a study examining the relationship between banking sector development and economic growth in Lebanon from 1992-2011. The study uses regression analysis to test whether greater banking sector development, as represented by factors like private credit levels and banking efficiency, leads to increased economic growth. Preliminary analysis includes a Granger causality test to determine the direction of the relationship between financial development and GDP growth. Key banking sector variables analyzed are private credit levels, interest rate spreads, banking assets, concentration levels, and deposit growth rates. The goal is to evaluate how Lebanon's banking-centered financial system impacts economic activity and development.
A Dynamic Analysis of the Impact of Capital Flight on Real Exchange Rate in N...iosrjce
This study examines the dynamic effect of capital flight on the real exchange rate of the naira.
Specifically this study seeks to investigate if a long-run relationship exists between real exchange rate and
capital flight in Nigeria. This will be done using quarterly time series data covering the period 1981 to 2009. In
this process the short-run dynamics of the interactions between the two variables will be analyzed.
Foreign financial resources inflows and stock market development empirical ev...Alexander Decker
This study empirically investigates the effects of foreign financial resource inflows on stock market development in Nigeria and Ghana between 1988-2011 for Nigeria and 1991-2011 for Ghana. Using market capitalization to GDP ratio as a proxy for stock market development and multiple linear regression analysis, the study finds that foreign direct investment, foreign portfolio investment, personal remittances, and official development assistance were positively related to stock market development in Nigeria, though official development assistance was insignificant. In Ghana, foreign direct investment, personal remittances, and external debt were negatively related to stock market development, while official development assistance was positively related. The study aims to contribute to existing literature by investigating the effects of multiple components of foreign financial inflows on stock
- The RMB's rise as an international currency is inevitable due to China's economic size and trade relationships. However, this process will be gradual rather than straightforward, described as "creeping internationalization."
- Currently, offshore RMB is primarily used for trade settlement, investment flows, and reserve management. Trade settlement in RMB is growing rapidly, led by Hong Kong, though it remains a small percentage of global trade. Investment flows are expected to drive more innovation in offshore RMB markets.
- Countries deepening economic ties with China will increase RMB holdings for strategic reasons, even if trade and investment are not yet substantial. New offshore RMB hubs will emerge alongside Hong Kong, with London and Singapore
This paper analyzes long-term data on short-term Japanese interest rates and compares them to key foreign rates to assess Japan's integration into international money markets over time. It finds that Japanese interest rates became less volatile and more closely linked to foreign rates in the inter-war period, possibly due to deeper financial integration or use of interest rates to manage external imbalances. The paper uses econometric analysis and cointegration tests to examine these relationships under changing domestic policy regimes and degrees of capital mobility. It provides a thorough review of relevant theoretical frameworks and methodology to guide the empirical analysis.
Does Misaligned Currency Affect Economic Growth? – Evidence from Croatia Nicha Tatsaneeyapan
The document examines the relationship between currency misalignment and economic growth in Croatia from 2001 to 2013. It estimates the fundamental equilibrium exchange rate of the Croatian kuna using techniques like cointegration and VAR models. The findings show the kuna was undervalued from 2000 to 2007 and overvalued from 2008 to 2013. For the whole sample period, currency misalignments Granger caused GDP growth, but no causality was found for the two sub-periods. The research also finds the misalignments over this period were relatively small.
Application of taylor principle to lending rate pass through debate in nigeri...Alexander Decker
This document summarizes research on the pass-through of policy interest rates to retail lending rates in Nigeria. It finds that pass-through is incomplete, which contradicts the Taylor principle and implications for monetary policy effectiveness. The paper also reviews literature showing that retail rates typically do not fully adjust to changes in policy rates due to factors like bank-customer relationships and asymmetric information. An incomplete pass-through can interfere with the stabilizing role of monetary policy and alter macroeconomic stability.
Demand for money in hungary an ardl approach by nikolaos dritsakisBalaji Bathmanaban
This study examines the demand for money in Hungary using quarterly data from 1995 to 2010 within an autoregressive distributed lag (ARDL) framework. The results of the bounds test confirm a stable, long-run relationship between M1 real monetary aggregate, real income, inflation rate, and nominal exchange rate. Specifically, real income has a positive impact on money demand while inflation and exchange rates have negative impacts. Stability tests also reveal a stable money demand function over the period examined, indicating M1 is a suitable intermediate target for monetary policy in Hungary.
Thirlwall’s law, given by the ratio of the rate of growth of exports to the income elasticity of imports is a key result of Balance of Payments (BOP) constrained long run growth models with balanced trade. Some authors have extended the analysis to incorporate long run net capital flows. We provide a critical evaluation on these efforts and propose an alternative approach to deal with long run external debt sustainability, based on two key features. First, we treat the external debt to exports ratio as the relevant indicator for the analysis of external debt sustainability. Second, we include an external credit constraint in the form of a maximum acceptable level of this ratio. The main results that emerge are that sustainable long run capital flows can positively affect the long run level of output, but not the rate of growth compatible with the BOP constraint, as exports must ultimately tend to grow at the same rate as imports. Therefore, Thirlwall’s law still holds.
Macroeconomic and Institutional Determinants of Capital Market Performance in...Fakir Tajul Islam
This paper examines the institutional and macroeconomic
determinants of stock market performance using data in the last 20 years starting from 1995 to 2015. In this
paper, Gross Domestic Product (GDP), Consumer Price Index (CPI), inflation rate and Foreign Direct Investment
(FDI) inflows were used as the proxy of macroeconomic determinants, whereas market capitalization, total
issued capital and market turnover of Dhaka Stock Exchange were the proxy of institutional determinants of
capital market performance.
Determinants of stock price movements in nigeria evidence from monetary varia...Alexander Decker
This document summarizes a research article that examined the determinants of stock price movements in Nigeria from 1985 to 2010. The researchers used cointegration tests and regression analysis to analyze the relationship between stock prices and various macroeconomic variables, including monetary policy factors like interest rates, exchange rates, and money supply as well as inflation and political instability. The results showed no long-run relationship between the variables, but inflation was found to be a major determinant of stock price movements in Nigeria. The study recommends that monetary authorities pay attention to changes in money supply and inflation given their impact on stock prices.
Experimental study of the change in porosity of imeri oilsand rock contaminat...Alexander Decker
This study investigated the effect of CO2 injection on the porosity of Imeri oilsand located in Nigeria. The key findings were:
- The porosity of the oilsand core sample increased up to 7.89% in the first 16 days after intermittent CO2 injection.
- After 16 days, the measured porosity started to gradually decrease, and the outer surface of the core hardened.
- The fracture pressure of the core, a measure of its hardness, increased by 30.94% after 30 days of initial CO2 injection.
- This was likely due to reactions between the CO2 and oilsand that formed cementing materials or hydrates, sealing the pores and increasing hardness.
Exploring classroom teachers' awareness of pupils with learning disabilities ...Alexander Decker
This document summarizes a study that explored classroom teachers' awareness of students with learning disabilities in public primary schools in Tanzania. The study found that 15% of students have learning disabilities, higher than estimated rates. However, few teachers were aware of students with disabilities or how to provide appropriate instruction. Teachers identified students with difficulties based on poor academic performance but lacked understanding of learning disabilities. While teachers had some knowledge of inclusive education, their awareness of students' specific learning needs was limited. The study aimed to strengthen teacher skills to improve education for students with disabilities.
Teks tersebut berisi soal-soal mengenai dinamika gerak, hukum Newton, gerak parabola, dan gerak melingkar beraturan. Soal-soal tersebut mencakup topik percepatan, kecepatan, gaya, dan sistem massa yang dihubungkan dengan tali dan katrol. Teks tersebut juga berisi nama-nama anggota kelompok yang mengerjakan soal-soal tersebut.
Exploring risk management disclosure practices in non profit organisations in...Alexander Decker
This document summarizes a study that examines risk disclosure practices in annual reports of 50 non-profit organizations (NPOs) registered in Malaysia. The study analyzed disclosures across six types of risks: organizational, operational, compliance, financial, reputation, and money laundering. Results found that NPOs provided more disclosure for mandatory financial items but lower voluntary disclosure for other risk types. Overall, there was a lack of risk disclosure that could increase risks harming the organizations. The study aims to provide feedback for NPOs to improve risk management and help regulators strengthen disclosure requirements.
Explaining the determinants of trade credit an empirical study in the case of...Alexander Decker
This document summarizes a research study that investigated the determinants of trade credit for 403 unlisted Saudi Arabian firms from 2000 to 2004. The study found that trade credit accounts for a large portion of liabilities for these firms. Using a panel data estimation technique, the study tested hypotheses related to five determinants of trade credit: availability of financial resources, firm creditworthiness, profitability, liquidity, and growth opportunities. The results showed that trade credit is negatively related to traditional debt sources but positively related to firm size, liquidity measures like current assets, and growth. Trade credit was found to be negatively related to firm age and profitability, consistent with hypotheses.
The study gauged the influence of exchange rate fluctuations on the Performance of the Nigerian Economy over the time from of 1986 to 2016, utilizing secondary data tracked from the statistical report of the Apex Nigerian bank, and utilizing techniques such as Unit root test, Generalized autoregressive conditional heteroscedasticity (GARCH), Impulse-Response Output and Variance-Decomposition Test to evaluate variables such as Interest rate, inflation rate, exchange rate against a sole indicator of Economic Performance I.e. Gross Domestic Product Growth rate (GDPGR), it was discovered that despite the short run influx of the spill over volatility of Interest rate and inflation rate, there exist no long run volatility influence of interest rate on Economic Performance in Nigeria. It was therefore recommended that the apex financial institution and relevant policy makers should ensure an interest rate system and status that could stimulate growth or production and the nation should endeavour to utilize her interest rate in controlling its output level as it motivates Economic Performance (GDPGR).
A survey of foreign exchange rate determinants in nigeriaAlexander Decker
The document presents a study that investigates factors that determine foreign exchange rates in Nigeria over the period 1960-2011. Regression analysis was used to analyze the relationship between the foreign exchange rate and several independent macroeconomic variables including GDP, balance of payments, external reserves, inflation, deposit rates, and lending rates. The results of the regression showed no statistically significant relationship between the foreign exchange rate and any of the independent variables over the time period analyzed.
Extant literature revealed that international trade plays a key role to address the economic phenomena and can help to earn foreign exchange. Despite the accruable benefits from international trade and the countrys huge oil export that account for about 90 of its foreign exchange earnings, Nigerias trade balance and exchange rate remain unfavourable. The persistent rise in Nigerias exchange rate and unfavourable trade balance in recent time warrants an empirical probe. This study therefore examines the effect of exchange rate, domestic income, foreign income, consumption expenditure, money supply and interest rate on trade balance using a secondary time series data covering a period of thirty years from 1991 2020. The study employed a regression technique of the Ordinary Least Square OLS . All data used were secondary data obtained from the statistical bulletin of Central Bank of Nigeria CBN and National Bureau of Statistics NBS annual publications. After determining stationarity of the study variables using the ADF Statistic, it was discovered that the variables were all integrated at level, first and second difference, and found out to be stationary at their first difference. The study also using Johansen Cointegration Test, found that there is a long run relationship between the variables. Hence, the implication of this result is that there is a long run relationship between trade balance and other variables used in the model. From the result of the OLS, it is observed that exchange rate, domestic income, foreign income and money supply have a positive and significant impact on trade balance in Nigeria. The study recommends that the government should fixed or peg on the exchange rate through the central bank. This will enable the government to buy and sell its own currency against the currency to which it is pegged. The government should strive to reduce inflation to make exports more competitive. The government should also enhance supply side policies to increase long term competitiveness. Edokobi, Tonna David | Okpala, Ngozi Eugenia | Okoye, Nonso John "Exchange Rate and Trade Balance Nexus" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd45079.pdf Paper URL: https://www.ijtsrd.com/management/public-sector-management/45079/exchange-rate-and-trade-balance-nexus/edokobi-tonna-david
1. The document examines the impact of exchange rate fluctuations on foreign trade in Nigeria from 1980-2014. It uses data from the Central Bank of Nigeria and Federal Bureau of Statistics to analyze the relationship between exchange rate, import, export, GDP, and price level.
2. Statistical analysis including OLS regression, cointegration, error correction model, and Granger causality tests were employed. The results show exchange rate fluctuations have a significant negative impact on foreign trade in Nigeria, explaining 56% of the variation in trade.
3. The error correction model also indicates about 55% of disequilibria from the previous year's foreign trade were corrected in the current year, suggesting exchange rate volatility creates instability in Nigeria
MEASURING FOREIGN EXCHANGE PRESSURE: A TEXT MINNING APPROACHAJHSSR Journal
ABSTRACT : This study investigates the effectiveness of sentiment analysis, using text-mining approach within
the context of big-data analytics, in measuring foreign exchange pressure in Nigeria. It begins with the construction
of two sentiment-based index of foreign exchange pressure; the first, labelled EMP, constructed by text-mining
public sentiments about foreign exchange management in Nigeria, within the platform of twitter, while the second,
labelled EMP_Trend, constructed from Google Trend as an index of sampled search of related words around foreign
management in Nigeria. Thereafter, the study tested the effectiveness of both indices in signaling movement in
exchange rate (IEW) in Nigeria relative to existing traditional measures of foreign exchange pressure in Nigeria.
The Predictive Regression Model (PRM) and Clark and West (2007) frameworks were employed. Findings from
the study suggest that foreign exchange market pressure index using Sentiment Analysis may hold sufficient
information in predicting and signaling movement in exchange rate (IEW) in Nigeria. Specifically, EMP_Trend
and EMP were found to improve the forecast of IEW, as their estimated Clark and West coefficients were both
positive and statistically significant at 5 per cent. The study recommends that monetary authorities leverage
sentiment analysis to monitor future direction in exchange rate, with a view to implementing policies that would
moderate the prevailing instability in the foreign exchange market in the Nigeria.
KEYWORDS: Foreign Exchange Pressure, Sentiment Analysis, Text-mining, leading indicator, predictive
regression model.
This paper examined the impact of foreign exchange accessibility on the growth of manufacturing sector in Nigeria. The study relied on secondary time series annual data and analyzed the collected data by using inferential statistics. The estimation techniques include Ordinary Least Square (OLS) method, Augmented Dickey-Fuller (ADF) Unit Root test, Johansen Co-integration test and Autoregressive Distributed Lags (ARDL) model. The study revealed that there was an existence of both short run and long run relationships among the variables of interest. The findings of the study revealed that the supply of foreign exchange and by implication, its accessibility is critical to the growth of the manufacturing sector considering the positive relationship of the lags of foreign exchange supply. Similarly, the amount of foreign exchange unutilised by the manufacturing sector (FXUM) was positively and significantly related to the growth of manufacturing sector. In the light of the forgoing findings, it was concluded that the time to time behaviours of foreign exchange supply by the Central Bank of Nigeria, forex utilization by the manufacturing sector and exchange rate all put together had a significant impact on the growth of Nigerian manufacturing sector. Consequently, it was recommended that government should ensure optimal and consistent supply of foreign exchange to the manufacturing sector as this has been found to have positive effect on the growth of the sector in this study. In addition, government should improve on her monitoring activities of the amount and distribution of foreign exchange allocations to the manufacturing sector of the economy in order to ensure that they are utilised for productive purposes only and reduce the incidence of diversion to unproductive and illegitimate purposes.
Foreign capital flows depends on the prevailing monetary forces as supported by capital flows
theory and the mechanism linking these two variables is that contraction of net domestic assets through an
open market sale of bonds will place upward pressure on domestic interest rates. Higher interest rates attract
foreign funds, generating a capital inflow which relieves the pressure on domestic interest rates. Has this
actually happened? It is against this backdrop that the present study investigated the impact of monetary policy
on international capital inflows in Nigeria for a period of 22 years (1994-2015) using time series data. The
autoregressive distributed lag technique revealed that the short-run and long-run significant determinants of
foreign capital inflows are largely from broad money supply, nominal exchange rate, inflation rate and interest
rates spread except inflation rate that is insignificant in the long-run. This outcome upholds theoretical
prediction. Long-run equilibrium relationship was found between the dependent variable and the regressors.
Further examination of the short run dynamics of the model showed that the speed of adjustment coefficients
ECM (-1) to restore equilibrium have a negative sign and statistically significant at 1% level, ensuring that
long-run equilibrium can be attained and about 89% of the short-run deviation from the equilibrium (long-run)
position is corrected annually to maintain the equilibrium. Since the empirical evidence revealed that monetary
aggregates such as broad money supply, nominal exchange rate, inflation rate and interest rates spread
influence foreign capital inflows, it is therefore recommended that government should continue to pursue
expansionary monetary policy and foreign exchange policies that would ensure competitiveness of the
economy in order to attract the much needed foreign capital inflows that would engender economic growth.
Exchange Rate Volatility and Import Substitution in Nigeria: A Sectoral AnalysisAJHSSR Journal
ABSTRACT: The study attempts to estimate the impact of exchange rate volatility on import substitution in
Nigeria. The study establishes that the volatility in exchange rate has a detrimental effect in the agricultural
sector in the short run, but this normalizes in the long run, thus having a positive permanent effect. Similarly,
the empirical results depict that the demand for the consumer goods sector was negatively affected by exchange
rate shocks in the initial stage, but over the periods had a positive effect. The result of the food sector, however,
conforms with the apriori expectation that currency exchange rates have a significant impact on food prices.
Food prices are likely to respond as the Naira weakens or strengthens vis a visother currency.This study
provides empirical evidence to drive policy formulation in the management of the country’ foreign exchange
rate as it impacts on trade of goods and services, andprovides information that may guide more studies on the
subject.
Keywords: Exchange rate volatility; Import substitution; Agricultural sector; GARCH; Vector autoregression
Macroeconomic Variables and Stock Price Changes in Emerging Stock Market Evid...ijtsrd
This study investigated macro economic variables and stock price changes in emerging stock market evidence from Nigeria. The main objective of the study was to ascertain the major macroeconomic variables that are determinants of stock prices in Nigerian Stock market. Secondary data was collected from CBN Statistical bulletins and used. The co integration technique was used for the data analysis. The results of the study or findings revealed that Exchange rate has a positive effect on stock prices Real GDP has a positive effect on stock prices money supply has negative effect on stock prices on the long run while interest rate, inflation rate, have no significant effect on stock prices. Based on the findings, it is thus recommended as follows more attention should be paid to credit control and long term supply of money by monetary authorities to stabilize stock prices instead of adopting price stabilization measures. Concerned authorities should tame inflation and interest rates, check stock prices manipulations, ensure the production and promotion of export products agents of stock market can also predict stock prices by observing trend of output growth consistently of a particular industry and Nigeria government and entrepreneurs should engage in the production of tradable goods rather than only crude oil to create more export for the country and hence boost stock market trading with more investors. Matthew Osedebamhen Moni | Steve Nkem Ibenta | Victor Ike Okonkwo "Macroeconomic Variables and Stock Price Changes in Emerging Stock Market Evidence from Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-6 | Issue-1 , December 2021, URL: https://www.ijtsrd.com/papers/ijtsrd47503.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/47503/macroeconomic-variables-and-stock-price-changes-in-emerging-stock-market-evidence-from-nigeria/matthew-osedebamhen-moni
FOREIGN EXCHANGE INTERVENTION AND EXCHANGE RATE MOVEMENT IN NIGERIAAJHSSR Journal
ABSTRACT : This study was set to evaluate the impact of the foreign exchange intervention of the Central
Bank of Nigeria (CBN) on exchange rate movement in Nigeria, in view of the prevailing instability in the foreign
exchange market in Nigeria, even in the face of enhanced intervention of the Bank in the market. The study adopts
the framework of a co-integrating autoregressive distributed lag (ARDL) model, using monthly data, spanning
the period 2017M4 to 2022M6, and sourced from the statistical bulletin of the CBN. Findings from the study
suggest that the CBN interventions in the foreign exchange market do not significantly impact the movement in
exchange rate in Nigeria in both the short- and long-run. This finding raises questions about the need to sustain
the interventions, given the impact it has on the external reserves of the country. However, the long-run impact of
external reserves on exchange rate suggests that reserves accumulation is consistent with currency appreciation.
This, however, is not the case in the short-run, as the short-run impact of external reserves on exchange rate is
insignificant, both contemporaneously and for most of its lags. Terms of trade, on the other hand, appears to drive
appreciation of exchange rate in the short-run, though its impact of exchange rate in the long-run is statistically
insignificant. The study recommends that the CBN discontinues the interventions in the market, and rather explore
better options of sustaining the net inflow of foreign capital to Nigeria. This may include providing foreign
currency dominated securities, with very competitive naira-based interest rates, for retail investor. This would
attract inflow of foreign exchange, for Nigerians both resident in the country and abroad, resulting in a moderation
in the foreign exchange market pressure.
KEYWORDS: Foreign Exchange Intervention, Foreign Exchange Market, Exchange rate, External Reserves,
ARDL model.
Monetary Policy and Trade Balance in NigeriaYogeshIJTSRD
Nigeria apex bank Central Bank of Nigeria CBN has continued to battle with the job of reviving the ailing economy and putting it on the path of growth. The economy has witnessed unprecedented job loss, rising poverty level, accelerating inflation, sluggish economic growth and disequilibrium in the balance of trade. The study therefore examine the effect of monetary policy on trade balance in Nigeria. Specifically the study ascertained the extent to which inflation, demand deposit, liquidity ratio, exchange rate and interest rate have influenced trade balance in Nigeria using an econometric regression model of the Ordinary Least Square OLS . From the result of the OLS, it is observed that monetary policy rate, demand deposit, liquidity ratio and exchange rate have a significant positive impact on foreign trade in Nigeria. This means that increases in monetary policy rate, demand deposit, liquidity ratio and exchange rate, will lead to increase in foreign trade in Nigeria. On the other, inflation rate and interest rate has a significant negative impact on foreign trade in Nigeria, meaning that as inflation rate and interest rate increases, will be bring about a decline in foreign trade in Nigeria. Based on the findings of this study, the study recommends that the government should employ a contractionary monetary policy to fight inflation by reducing the money supply in the country through decreased bond price. inflation, demand deposit, liquidity ratio, exchange rate and interest rate have influenced trade balance in Nigeria. The government should intervene in the foreign exchange market in order to build reserves for themselves or provide them to the bank to help stabilize the exchange rate. The government should strive to improve trade performance in the short and long run. They should also reduce government spending and tax capital inflow. Edokobi, Tonna David | Okpala, Ngozi Eugenia | Okoye, Nonso John "Monetary Policy and Trade Balance in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd45080.pdf Paper URL: https://www.ijtsrd.com/management/public-sector-management/45080/monetary-policy-and-trade-balance-in-nigeria/edokobi-tonna-david
11.the exchange rate determination in nigeria the purchasing power parity optionAlexander Decker
This document summarizes a study that tested the validity of using purchasing power parity (PPP) as an option for determining exchange rates in Nigeria. The study used regression analysis of time series data to compare PPP to Nigeria's existing floating exchange rate system. The results confirmed that PPP provides a better approach for determining realistic exchange rates and values for the Nigerian naira. The study concludes by recommending that the Central Bank of Nigeria replace the floating exchange rate system with one based on PPP.
Currency fluctuations and inflation are the natural norm for most major economies. Numerous factors influence economic growth, including a country’s exchange rate system performance, the outlook for inflation, and interest rate differentials. These are the most significant factors that hinder the economic growth of every nation. As a result, this analysis investigates the impact of exchange rate and inflation on Nigeria’s growth performance from 1986 to 2021. Impulse response and variance decomposition were estimated. The real gross domestic product (RGDP) was used as a proxy for growth performance, while the inflation rate (IFNR), real exchange rate (REXR), and interest rate (INTR) were also used as proxies. The results of impulse response and variance decomposition estimates in the short-run (third quarter) and long-run (tenth quarter) show that real exchange rate D(REXR), INTR, and IFNR all have a positive impact on RGDP variation, with values of 13.38%, 31.88%, and 22.40%, respectively, in the third quarter. In the long run (the 10th quarter), REXR contributed approximately 28.76% of the variation in RGDP. The interest rate contributed 24.14%, while the IFNR has contributed about 28.27% of the variation in RGDP in the long run. Therefore, summing the contributions of REXR, INTR, and INFR to RGDP, these variables contributed about 81.17% of the variation in RGDP in the long run. Hence, the research concluded that REXR, INTR, and IFNR have a positive effect on growth performance as proxied by RGDP in Nigeria within the period of the research. The research recommended that the government should provide a policy that will reduce the excess growth of aggregate demand (AD) in the economy, which will reduce inflationary pressure, in order to achieve the sustainable development goals (SDGs) of 2030 in Nigeria, which include restoring economic growth and macroeconomic stability through macroeconomic variables such as the exchange rate, inflation, and other significant variables.
The International Journal of Engineering & Science is aimed at providing a platform for researchers, engineers, scientists, or educators to publish their original research results, to exchange new ideas, to disseminate information in innovative designs, engineering experiences and technological skills. It is also the Journal's objective to promote engineering and technology education. All papers submitted to the Journal will be blind peer-reviewed. Only original articles will be published.
The papers for publication in The International Journal of Engineering& Science are selected through rigorous peer reviews to ensure originality, timeliness, relevance, and readability.
Long Run Impact of Exchange Rate on Nigeria’s Industrial Outputiosrjce
While many scholars have carried out a lot of research on the impact of exchange rate volatility and
price shocks on economic growth, this study departs from previous studies and seeks to provide suggestions for
Nigerian policy makers on the attainment of an ideal exchange rate necessary to boost industrialization and
industrial output. The economies of all the countries of the world are linked directly or indirectly through asset
and goods markets. This linkage is made possible through trade and foreign exchange. The price of foreign
currencies in terms of a local currency (i.e. foreign exchange) is therefore important to the understanding of the
growth trajectory of all countries of the world. The consequences of substantial misalignments of exchange rates
can lead to output contraction and extensive economic hardship. These therefore, bring up the issue of an ideal
exchange rate necessary for the achievement of a set of diverse objectives - economic growth, containment of
inflation and maintenance of external competiveness. This study employed the use of the ordinary least square
technique to examine the impact of exchange rate stability on industry output in Nigeria using annual time
series data from 1980 to 2013. The result of the study showed that domestic capital, foreign direct investment,
population growth rate, and real exchange rate were significant determinants of industrial output. The changes
in external balance and inflation were of little or no consequences to industrial output. Based on the findings,
the researcher recommended that conscious efforts should be made by government to fine-tune the various
macroeconomic variables in order to provide an enabling environment that stimulates industrial output and
eventual economic growth.
The choice of the exchange policies in the primary commodity exporting countr...Alexander Decker
This document analyzes the exchange rate policies of Morocco and estimates the equilibrium real exchange rate of the Moroccan Dirham. It uses an autoregressive distributed lag model to estimate the long-run relationship between the real exchange rate and macroeconomic fundamentals like terms of trade, degree of openness, government expenditure, and net capital flows. The results suggest that Morocco's fixed exchange rate regime adopted in 1973 is not responsible for its trade deficit or low export growth, as the Dirham's value is close to its equilibrium level. However, other factors may be contributing to Morocco's low economic performance. The document examines theories on how exchange rates and macroeconomic variables interact and equilibrium exchange rates are estimated.
Macroeconomic uncertainty and foreign portfolio investment volatility evidenc...Alexander Decker
This document examines the relationship between macroeconomic uncertainty and foreign portfolio investment (FPI) volatility in Nigeria from 1986-2011. It finds that macroeconomic variables like interest rates, inflation rates, market capitalization rates, exchange rates, and GDP, as well as FPI, are all highly volatile and respond asymmetrically to new information. A stable macroeconomic environment is necessary for steady FPI inflows, while steady FPI inflows also contribute to some level of macroeconomic stability. The study recommends monitoring insider activities in the capital market and balancing economic growth policies with price stability policies.
This document summarizes a study that modeled volatility and daily exchange rate movement between the Nigerian naira and US dollar from January 2001 to May 2019. The results found that exchange rate volatility is positively related to returns and persistent over time. It was also discovered that negative news produces more volatility than positive news of equal magnitude, indicating an asymmetric or "leverage" effect. The researchers recommend that the Central Bank of Nigeria intervene more actively to reduce excess volatility between the currencies.
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Abnormalities of hormones and inflammatory cytokines in women affected with p...Alexander Decker
Women with polycystic ovary syndrome (PCOS) have elevated levels of hormones like luteinizing hormone and testosterone, as well as higher levels of insulin and insulin resistance compared to healthy women. They also have increased levels of inflammatory markers like C-reactive protein, interleukin-6, and leptin. This study found these abnormalities in the hormones and inflammatory cytokines of women with PCOS ages 23-40, indicating that hormone imbalances associated with insulin resistance and elevated inflammatory markers may worsen infertility in women with PCOS.
A usability evaluation framework for b2 c e commerce websitesAlexander Decker
This document presents a framework for evaluating the usability of B2C e-commerce websites. It involves user testing methods like usability testing and interviews to identify usability problems in areas like navigation, design, purchasing processes, and customer service. The framework specifies goals for the evaluation, determines which website aspects to evaluate, and identifies target users. It then describes collecting data through user testing and analyzing the results to identify usability problems and suggest improvements.
A universal model for managing the marketing executives in nigerian banksAlexander Decker
This document discusses a study that aimed to synthesize motivation theories into a universal model for managing marketing executives in Nigerian banks. The study was guided by Maslow and McGregor's theories. A sample of 303 marketing executives was used. The results showed that managers will be most effective at motivating marketing executives if they consider individual needs and create challenging but attainable goals. The emerged model suggests managers should provide job satisfaction by tailoring assignments to abilities and monitoring performance with feedback. This addresses confusion faced by Nigerian bank managers in determining effective motivation strategies.
A unique common fixed point theorems in generalized dAlexander Decker
This document presents definitions and properties related to generalized D*-metric spaces and establishes some common fixed point theorems for contractive type mappings in these spaces. It begins by introducing D*-metric spaces and generalized D*-metric spaces, defines concepts like convergence and Cauchy sequences. It presents lemmas showing the uniqueness of limits in these spaces and the equivalence of different definitions of convergence. The goal of the paper is then stated as obtaining a unique common fixed point theorem for generalized D*-metric spaces.
A trends of salmonella and antibiotic resistanceAlexander Decker
This document provides a review of trends in Salmonella and antibiotic resistance. It begins with an introduction to Salmonella as a facultative anaerobe that causes nontyphoidal salmonellosis. The emergence of antimicrobial-resistant Salmonella is then discussed. The document proceeds to cover the historical perspective and classification of Salmonella, definitions of antimicrobials and antibiotic resistance, and mechanisms of antibiotic resistance in Salmonella including modification or destruction of antimicrobial agents, efflux pumps, modification of antibiotic targets, and decreased membrane permeability. Specific resistance mechanisms are discussed for several classes of antimicrobials.
A transformational generative approach towards understanding al-istifhamAlexander Decker
This document discusses a transformational-generative approach to understanding Al-Istifham, which refers to interrogative sentences in Arabic. It begins with an introduction to the origin and development of Arabic grammar. The paper then explains the theoretical framework of transformational-generative grammar that is used. Basic linguistic concepts and terms related to Arabic grammar are defined. The document analyzes how interrogative sentences in Arabic can be derived and transformed via tools from transformational-generative grammar, categorizing Al-Istifham into linguistic and literary questions.
A time series analysis of the determinants of savings in namibiaAlexander Decker
This document summarizes a study on the determinants of savings in Namibia from 1991 to 2012. It reviews previous literature on savings determinants in developing countries. The study uses time series analysis including unit root tests, cointegration, and error correction models to analyze the relationship between savings and variables like income, inflation, population growth, deposit rates, and financial deepening in Namibia. The results found inflation and income have a positive impact on savings, while population growth negatively impacts savings. Deposit rates and financial deepening were found to have no significant impact. The study reinforces previous work and emphasizes the importance of improving income levels to achieve higher savings rates in Namibia.
A therapy for physical and mental fitness of school childrenAlexander Decker
This document summarizes a study on the importance of exercise in maintaining physical and mental fitness for school children. It discusses how physical and mental fitness are developed through participation in regular physical exercises and cannot be achieved solely through classroom learning. The document outlines different types and components of fitness and argues that developing fitness should be a key objective of education systems. It recommends that schools ensure pupils engage in graded physical activities and exercises to support their overall development.
A theory of efficiency for managing the marketing executives in nigerian banksAlexander Decker
This document summarizes a study examining efficiency in managing marketing executives in Nigerian banks. The study was examined through the lenses of Kaizen theory (continuous improvement) and efficiency theory. A survey of 303 marketing executives from Nigerian banks found that management plays a key role in identifying and implementing efficiency improvements. The document recommends adopting a "3H grand strategy" to improve the heads, hearts, and hands of management and marketing executives by enhancing their knowledge, attitudes, and tools.
This document discusses evaluating the link budget for effective 900MHz GSM communication. It describes the basic parameters needed for a high-level link budget calculation, including transmitter power, antenna gains, path loss, and propagation models. Common propagation models for 900MHz that are described include Okumura model for urban areas and Hata model for urban, suburban, and open areas. Rain attenuation is also incorporated using the updated ITU model to improve communication during rainfall.
A synthetic review of contraceptive supplies in punjabAlexander Decker
This document discusses contraceptive use in Punjab, Pakistan. It begins by providing background on the benefits of family planning and contraceptive use for maternal and child health. It then analyzes contraceptive commodity data from Punjab, finding that use is still low despite efforts to improve access. The document concludes by emphasizing the need for strategies to bridge gaps and meet the unmet need for effective and affordable contraceptive methods and supplies in Punjab in order to improve health outcomes.
A synthesis of taylor’s and fayol’s management approaches for managing market...Alexander Decker
1) The document discusses synthesizing Taylor's scientific management approach and Fayol's process management approach to identify an effective way to manage marketing executives in Nigerian banks.
2) It reviews Taylor's emphasis on efficiency and breaking tasks into small parts, and Fayol's focus on developing general management principles.
3) The study administered a survey to 303 marketing executives in Nigerian banks to test if combining elements of Taylor and Fayol's approaches would help manage their performance through clear roles, accountability, and motivation. Statistical analysis supported combining the two approaches.
A survey paper on sequence pattern mining with incrementalAlexander Decker
This document summarizes four algorithms for sequential pattern mining: GSP, ISM, FreeSpan, and PrefixSpan. GSP is an Apriori-based algorithm that incorporates time constraints. ISM extends SPADE to incrementally update patterns after database changes. FreeSpan uses frequent items to recursively project databases and grow subsequences. PrefixSpan also uses projection but claims to not require candidate generation. It recursively projects databases based on short prefix patterns. The document concludes by stating the goal was to find an efficient scheme for extracting sequential patterns from transactional datasets.
A survey on live virtual machine migrations and its techniquesAlexander Decker
This document summarizes several techniques for live virtual machine migration in cloud computing. It discusses works that have proposed affinity-aware migration models to improve resource utilization, energy efficient migration approaches using storage migration and live VM migration, and a dynamic consolidation technique using migration control to avoid unnecessary migrations. The document also summarizes works that have designed methods to minimize migration downtime and network traffic, proposed a resource reservation framework for efficient migration of multiple VMs, and addressed real-time issues in live migration. Finally, it provides a table summarizing the techniques, tools used, and potential future work or gaps identified for each discussed work.
A survey on data mining and analysis in hadoop and mongo dbAlexander Decker
This document discusses data mining of big data using Hadoop and MongoDB. It provides an overview of Hadoop and MongoDB and their uses in big data analysis. Specifically, it proposes using Hadoop for distributed processing and MongoDB for data storage and input. The document reviews several related works that discuss big data analysis using these tools, as well as their capabilities for scalable data storage and mining. It aims to improve computational time and fault tolerance for big data analysis by mining data stored in Hadoop using MongoDB and MapReduce.
1. The document discusses several challenges for integrating media with cloud computing including media content convergence, scalability and expandability, finding appropriate applications, and reliability.
2. Media content convergence challenges include dealing with the heterogeneity of media types, services, networks, devices, and quality of service requirements as well as integrating technologies used by media providers and consumers.
3. Scalability and expandability challenges involve adapting to the increasing volume of media content and being able to support new media formats and outlets over time.
This document surveys trust architectures that leverage provenance in wireless sensor networks. It begins with background on provenance, which refers to the documented history or derivation of data. Provenance can be used to assess trust by providing metadata about how data was processed. The document then discusses challenges for using provenance to establish trust in wireless sensor networks, which have constraints on energy and computation. Finally, it provides background on trust, which is the subjective probability that a node will behave dependably. Trust architectures need to be lightweight to account for the constraints of wireless sensor networks.
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1. European Journal of Business and Management
ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)
Vol.5, No.29, 2013
www.iiste.org
Exchange Rate Dynamics and Balance of Payments Repositioning
in Nigeria
Prince Umor C. Agundu1* Waleru Henry Akani2 Fred Barivure Kpakol3
1.
Department of Banking & Finance, Rivers State University of Science & Technology, Port Harcourt,
Nigeria
2.
Department of Banking & Finance, Rivers State University of Science & Technology, Port Harcourt,
Nigeria
3.
Finance/Political Administration Consultant, Port Harcourt, Nigeria
* agundup@yahoo.com
Abstract
The study examines foreign exchange dynamics in the Nigerian economy in relation to balance of payments,
using time series drawn from the publications of the Central bank of Nigeria (CBN), Debt Management Office
(DMO) and National Bureau of Statistics (NBS). The regression method was adopted in data analysis, facilitated
by software package for social sciences (SPSS). The statistical results justified the alternate hypotheses, thus
affirming that the foreign exchange proxies specified in this study are significant predictors of variations in
balance of payments. In explaining the variations in the current and capital accounts of balance of payments, the
predictor coefficients are positive for exchange rate and external reserves but negative for external debt. This
analytical manifest is traditional as a favorable exchange rate (positively) stimulates trade and capital flows. Also,
an increase in external reserves (positively) boosts the confidence of foreign investors and this fundamentally
mirrors the strength and depth of liquidity in the global economy. It is a critical factor of foreign investment
interest in the economy. Furthermore, a nation’s external indebtedness apparently (negatively) conveys a profile
of macroeconomic weakness and flakiness. It is, therefore, vitally imperative for more auspicious management
systems to be institutionalized for the close monitoring stabilization of favorable profiles of exchange rate,
external reserves and external debt. This will advance and sustain a more attractive, competitive and productive
Nigerian economy.
Keywords: Foreign exchange, International investment, Nigerian economy
1. Introduction
For several years, the Nigerian economy witnessed high level volatility in foreign exchange dynamics, which
aggravated the nation’s balance of payments. Basically, adequate foreign exchange is required in the economy
for the servicing of external debts, importation of raw materials, machines and spares and upgrading of industrial
infrastructure for sustainable development. Against this backdrop, the concern of many scholars and economy
watchers has to do with the dynamics of foreign exchange, being contingent on the market forces of demand and
supply, as well as their critical linkages with balance of payments. Also of immense interest is the trend of
balance of payments between trading nations, which underscore financial and real investments cooperation for
economic cooperation and sustainable development. Some research works had examined changes in exchange
rate over the years, with emphasis on short-run equilibrium tendency. They also address the implications of
foreign exchange dynamics on international finance and investment profiling (Loto, 2011; Lipsey & Chrystal,
2004). Considering Nigeria’s macroeconomic context, this study examines foreign exchange dynamics in
relation to balance of payments.
Strategically, foreign exchange management systems are designed to help economic actors respond favorably to
address shocks and fluctuations in international business cycles, hence the emphasis on market efficiency and
macroeconomic stability. The proxies of foreign exchange dynamics in this study are also relevant in the analysis
of balance of payments plausibility and financial integration possibility. The key objectives of foreign exchange
management system in the Nigerian nation, therefore, holistically seek to address macroeconomic anomalies and
forge new international trade frontiers for sustainable development. This overriding poise inspires
macroeconomic policy interjections which tend towards liberalization, and underscore transient features of
market determined exchange rates. Competitive (aggressive) trade reforms are also vigorously pursued, which
complementarily bring about substantial reduction in import tariffs to the admiration of foreign investors. In the
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Nigerian scene, the apex bank equally undertakes measures to ensure adequate and timely availability of bank
credit for trade finance at competitive interest rates. It also puts forward those policies that are meant to create
appropriate institutional frameworks for greater national export drive. Similar endeavor like this in the past
culminated in the establishment of export-import bank, export processing zones and special free trade/economic
zones. Collectively, these institutions work to ensure safety, liquidity and optimality in the management of the
nation’s foreign exchange and allied trading profiles in the international market arena. In this study, therefore, the
variables adopted as proxies of foreign exchange dynamics are exchange rate, external reserves, and external
debt; while the current and capital accounts of balance of payments are designated as the criterion variables. The
study specifically has as its objectives:
To examine the extent to which the current account of balance of payments is related to exchange rate,
external reserves and external debt; and
To examine the extent to which the capital account of balance of payments is related to exchange rate,
external reserves and external debt.
These research objectives logically elicit the following hypotheses:
Ho1:
The current account of balance of payments is not significantly related to exchange rate, external
reserves and external debt; and
Ho2:
The capital account of balance of payments is not significantly related to exchange rate, external
reserves and external debt.
2.
Literature Review
In Nigeria, research works relating to foreign exchange dynamics and balance of payments generally underscore
the overriding goal of sustainable macroeconomic stability. Among the scholarly contributions are the works of
Obaseki (2000) and Alihu (2007), who fundamentally examined Nigeria’s foreign exchange management
regimes as well as mechanisms of fixing the critical challenges associated with foreign exchange vagaries and
vicissitudes in the economy. Their studies equally addressed foreign exchange dynamics and established that
Nigeria’s external trade policies have not significantly achieved many expected strategic macroeconomic targets.
In contemporary analytical discourse, three theories on which these research adventures anchor are:
Mint parity theory,
Purchasing power parity theory, and
Balance of payments parity
The mint parity theory is associated with international gold standards, where the currency in use was made of
gold or converted into gold at a fixed rate. Thus, the value of the currency unit was defined in terms of certain
weight of gold, and the apex bank of the country bought and sold gold at the specified price. The rate at which
the standard money of the country was converted into gold was the mint price of gold. The actual rate of
exchange, therefore, prevailed around mint parity relative to the cost of shipping gold between two countries.
The exchange rate under the gold standard was still subject to and operationally determined by the forces of
demand and supply between the gold points. The purchasing power parity (PPP) theory seeks to determine the
exchange rate between countries under inconvertible paper currency system. The purchasing power parity, thus,
represents the quotients of purchasing power of the different currencies. Equilibrium exchange rate between two
inconvertible paper currencies is attained where there is equality of purchasing power, anchored on relative price
levels. In the balance of payments theory, favorable balance of payments is expected to raise exchange rate as
driven by the demand and supply of foreign exchange. The rate of foreign exchange may also be associated with
seasonal trade fluctuations in export and import commodities.
Consequently, foreign exchange dynamics continue to pose strategic challenges to economic management and
administration in developing economies coupled with the intrigues of conducting trade within global policy
infrastructure. It has equally been observed that the introduction of Dutch Auction System in Nigeria has not
shown appreciable efficiency over the years as the market is highly characterized by exchange rate instability,
insignificant premium and declining reserves (Ogbonna, 2010; Nnanna, 2004; Onoh, 2002). In the face of scarce
foreign exchange resources, the apex bank of the nation closely monitors the use of periodic releases of foreign
exchange to ensure that appropriation and application by various sectors are in line with strategic economic
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priorities. This foreign exchange management strategic template facilitates the realization and sustenance of
favorable balance of payments position anchored on stability of the auspicious exchange rate of the nation’s
currency to other major currencies in the global arena. In Nigeria in particular, it is considered quintessential to
accentuate efficient and effective management of foreign exchange dynamics in view of the macroeconomic
connect with external reserves. Where the process runs smoothly, the economy stands to harness critical
advantages, including:
Availability of liquidity for settlement of international transactions especially in periods of temporary
constraints on the balance of payments of the nation;
Sustenance of reasonable import level in the face of high domestic propensity to import;
Maintenance of high level of reserves required to create high level confidence in the nation’s currency;
Supply of the desired quantum of foreign exchange for intervention in the market in order to keep the
exchange rate stable; and
Enhancement of the country’s international credit worthiness rating, as balance of payments represents
a veritable line of defense of a country’s strategic credibility.
Conventionally, a good level of reserve serves as notice to the international community that a country’s
economic prospects are good. It also creates the environment for attracting international investors’ confidence
besides serving as buffer against external shocks and international financial market volatility (Ali & Yusuf, 2011;
Onoh, 2007). A constructive foreign exchange management system gives a country the favorable trading position
which further increases her stock of external reserves. The increase in reserves equally provides additional
cushion against sudden developments such as sharp drop in prices of major exports. It also gives a country
adequate time to adjust expenditure patterns to externalities without destabilizing the economy. In the light of
these, intermittent intervention by the apex bank in the affairs of the external sector is justified in terms of the
desire to realize these strategic macroeconomic targets and further sensitize public authorities to be more
constructively involved in the funding of their foreign exchange markets (Imegi, Idoniboye, Maxwell & Okon,
2008; Gbosi, 2005). These issues as they concern the Nigerian economy are examined in this study with critical
analysis of current and capital accounts of balance of payments (the criterion variables) in relation to exchange
rate, external reserves and external debt (the predictor variables).
3.
Research Methodology
In this study, the secondary data required for analysis are drawn from the publications of the Central Bank of
Nigeria (CBN), Debt Management Office (DMO), and National Bureau of Statistics. The time series of 23-year
frame (1980-2008) are analyzed with the aid of software package for social sciences (SPSS), the main statistical
tool being regression method (Kpakol, 2013). The analytical functions are as follows:
CUA = ao + a1 EXR + a2EXTR + a3 EXTD + u
CAA = ao + a1 EXR + a2EXTR + a3 EXTD + u
…
…
[Equation 1]
[Equation 2]
Where:
CUA = Current account of balance of payments
CAA = Capital account of balance of payments
EXR = Exchange rate
EXTR = External reserves
EXTD = External debt
The time series relating to the designated analytical variables are presented in Tables 1, 2, 3 and 4:
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statistical results are presented in Tables 5 and 6:
Table 5: Test of Research Hypothesis one (RH1)
Dependent Variable: CUA
Method: Least Squares
Variable
Coefficient
Std. Error
t - Statistic
C
-91942.72
234595.5
-0.391920
EXR
27068.62
5748.957
4.708440
EXTR
0.057003
0.084173
0.677217
EXTD
-0.606341
0.146319
-4.143958
R-squared
0.757195
Mean dependent var.
Adjusted R-squared
0.718857
S.D. dependent var.
S.E. of regression
742410.0
Akaike info criterion
Sum squared resid.
1.05E+13
Schwarz criterion
Log likelihood
-341.3446
F-Statistic
Durbin-Watson Stat.
1.306109
Prob. (F-Statistic)
Prob.
0.6995
0.0002
0.5064
0.0006
800351.7
1400169.
30.02996
30.22744
19.75089
0.000005
R2 = 0.76; Explanatory capacity = 76%
F-Statistic = 19.75; P-Value = 0.00
t - Statistic = 0.39; P-Value = 0.70
Source: Research Data (SPSS-aided)
Highlights:
Table 6: Test of Research Hypothesis Two (RH2)
Dependent Variable: LOG (CAA)
Method: Least Squares
Variable
Coefficient
Std. Error
t – Statistic
C
7.496309
1.261333
5.943162
LOG (EXR)
0.578196
0.202160
2.860085
LOG (EXTR)
0.342695
0.095053
3.605292
LOG (EXTD)
-0.093835
0.071487
-1.312626
R-squared
0.871805
Mean dependent var.
Adjusted R-squared
0.846166
S.D. dependent var.
S.E. of regression
0.764260
Akaike info criterion
Sum squared resid.
8.761393
Schwarz criterion
Log likelihood
-19.60603
F – Statistic
Durbin-Watson stat.
1.304335
Prob. (F - Statistic)
Prob.
0.0000
0.0119
0.0026
0.2090
12.35947
1.948584
2.484846
2.683675
34.00305
0.000001
R2 = 0.87; Explanatory capacity = 87%
F-Statistic = 34.0; P-Value = 0.00
t - Statistic = 5.94; P-Value = 0.00
Source: Research Data (SPSS-aided)
In Table 5 which relates to Research Hypothesis One (RH1), the coefficient of determination (R2) is 0.76. This
indicates that the dynamics of exchange rate, external reserves and external debt explain 76% of the variations in
current account of balance of payments in Nigeria, in the period under consideration. In Table 6 which relates to
Research Hypothesis Two (RH2), the coefficient of determination (R2) is 0.87. This indicates that the dynamics
of exchange rate, external reserves and external debt explain 87% of the variations in capital account of balance
of payments in Nigeria, in the period under consideration. The F - Statistic in each hypothetical case, also affirms
the overall model fit at 95% confidence level. Furthermore, the t – Statistic of 5.94 is significant and indicates
that balance of payments is significantly related to the foreign exchange dynamics. Categorically considering the
hypothetical specifications, it is clearly established that:
Highlights:
The current account of balance of payments is significantly related to exchange rate, external reserves
and external debt; and
The capital account of balance of payments is significantly related to exchange rate, external reserves
and external debt.
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These analytical revelations are crucial to repositioning foreign exchange management systems for sustainable
efficiency and efficacy. With respect to exchange rate dynamics, various management systems/regimes had
sought to achieve fundamental macroeconomic objectives including increase in domestic production, boost in
non-oil exports, improved export competitiveness while reducing the demand for imports, and higher confidence
in the nation’s currency. However, the criticality of such national targets in relation to the exchange rate
dynamics remains vitally relevant in furtherance of the macroeconomic task of attaining and sustaining favorable
balance of payments stability, low unemployment rate, auspicious general price level, and competitive economic
growth rate. The pursuit of these objectives, though quite challenging in the face of fluctuations in the exchange
rate, had actually aggravated many nation’s fortunes and balance of payments profiles. This is the quintessential
thrust of policy redirection and systemic repositioning as the nations brace up for more competitive growth and
development imperatives in the global economy.
5.
Conclusion
In the early 1980s, the Nigerian government closed the nation’s borders to allow old currency (the naira) notes to
be replaced with new ones. Exchange control and related regulations were also designed to forestall possible
repatriation of the Nigerian naira which may have been smuggled to foreign countries. The measures were to
further address the challenges bordering on future convertibility of the naira to other major currencies of the
world. Subsequently, particularly from 1984 through 1986 and 1990, Nigeria recorded surplus balance of
payments. Paradoxically, this was discovered not to have conventionally resulted from export expansion but due
to adverse economic vicissitudes which compelled the government to adopt very severe import restriction
measures. The prevailing exchange rates then, were expected to contribute towards a more favorable balance of
payments, by efficiently and effectively promoting growth in non-oil exports and boosting the nation’s current
account, but all to no avail. The austere circumstances of the time evolved and eventually culminated in the
enunciation and introduction of a structural adjustment program (SAP). Although real wages and government
social commitments to the populace continued to decline, the intervention program was endorsed by the World
Bank as veritable blueprint for the restoration of national economic viability, stability and sustainability, with a
view to regaining strategic relevance in the domestic and international economic arena.
This study, therefore, examined the relationship between foreign exchange dynamics and balance of payments in
Nigeria; the proxies being exchange rate, external reserves, and external debt for the predictor variables as well
as current and capital accounts for the criterion variable. The study covered a 23-year period (1986- 2008), time
series drawn from the publications of the Central bank of Nigeria (CBN), Debt Management Office (DMO) and
National Bureau of Statistics (NBS). Two research hypotheses were formulated and tested using multiple
regression and log linear methods of data analysis, aided by software package for social sciences (SPSS). The
analytical outcomes are quite revealing, viewed against several contemporary theoretical submissions and
contributions (Nwidobie, 2011; Richardson, Edeme & Sunday, 2009; Ojo, 2008). The variations in balance of
payments are significantly explained by the dynamics of exchange rate, external reserves and external debt (the
predictor variables).
It is, therefore, recommended that the current and capital accounts of the balance of payments should be closely
monitored in view of their significant relationship with foreign exchange dynamics. The apex bank should
intermittently intervene to ensure that there is relative stability in the exchange rate in order to achieve favorable
account balances. Exchange rate volatility should not make the forecasting of future trends of the accounts an
exercise in futility. There should be a more conscientious national disposition towards institutionalizing:
Highly functional exchange rate management system;
Highly robust external reserves management system; and
Highly constructive external debt management system.
With respect to the management of Nigeria’s external reserves, relative tightening while the monetization regime
and strategic financing budget deficits are shortfalls are controlled to avert further adverse effects on the critical
accounts. Market determined exchange rates should be relatively adopted and sustained to make the prevailing
policy framework more efficient and effective in promoting export growth. The country should also target higher
economies in non-oil export lines in order to boost the accounts and by extension enhance the nation’s balance of
payments. For exports which are not critically susceptible to the influence of domestic policies, more
competitive trade policy should be pursued to reinvent a robust non-oil export profile that drive the nation’s
quest for economic diversification and vantage balance of payments. A more acceptable and competitive
exchange rate should prevail in lieu of the equilibrium exchange rate to check the overbearing operations of
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parallel markets. All these well considered and conscientiously applied will meaningfully prevent distortions and
attendant systemic contagion in the economy.
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