This article was originally published as: EXCHANGE RATE MISALIGNMENT AND PERFORMANCE OF THE NIGERIAN ECONOMY
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Abstract
The study appraised exchange rate misalignment onNigerian economy. The aims were to assess the effect of exchange rate fluctuations on gross domestic product and how inflation, real money supply and trade openness affect gross domestic product in Nigeria. The study anchored on Purchasing Power Parity theory (PPP). Historical research design was used while Augmented Dickey-Fuller (ADF) test, Johansen cointegration test and Pasimonius Error Correction Mechanism (ECM) test and estimation of relevant equations were applied. In this study, exchange rate fluctuation is measured as deviations around the trend which makes it different from other studies. It was discovered that short-run and long-run exist between and among the variables of study. The result revealed that exchange rate misalignments have significant negative relationship with Gross Domestic Product (GDP) in the long run and the short-run. Trade openness was found to have an inverse significant relationship with GDP in the long-run and the short-run while real money supply and inflation were found to have a significant direct relationship with GDP in the long-run and short-run. Policies that will stimulate local production for export and regulation of activities of bureau the change were recommended. Monetary authority should strengthen price stability policies through regulation of money supply in order to limit geometric inflationary trend. Lastly, export diversification should be strengthened to enhance trade openness.
Authors
- Okoi Innocent Obeten (University of Calabar)
- Maryjoan Ugboaku Iheanacho (University of Calabar)
- Comfort Innocent Okoi (University of Calabar)
Keywords
Exchange rate misalignment, inflation, real money supply, purchasing power parity, trade openness
References
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