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

N. M. Gatawa, Sunday Elijah and Mohammed Umar
Additional contact information
N. M. Gatawa: Department of Economics, Usmanu Danfodiyo University, Sokoto, Nigeria
Sunday Elijah: Department of Economics, Federal University, Gusau, Nigeria
Mohammed Umar: Usmanu Danfodiyo University, Sokoto, Nigeria

Turkish Economic Review, 2018, vol. 5, issue 3, 285-307

Abstract: This paper empirically investigates the impact of floating exchange rate on balance of payment in Nigeria during 1986–2016. Unit root test, cointegration test, VEC Granger causality/Exogeneity Wald test and Vector Error Correction Model (VECM) were econometric tools used to establish the relationship between exchange rate and balance of payment. The results showed a positive and statistically significant relationship in both short-run and long-run between balance of payment and exchange rate of the Nigerian Economy during the period under review. The VEC Granger Causality/Block Exogeneity further revealed that the major determinants of exchange rate are real GDP and money supply. It further reveals that the nexus among the variables runs from government expenditure to real GDP and money supply to exchange rate, and then to Balance of Payment. Therefore it was recommended amongst other things that the policy of exchange rate depreciation should be maintained but with government intervention guide. Government through Central Bank of Nigeria (CBN) should apply expenditure reducing monetary policies through money supply and domestic credit to promote favourable BOT which invariably stabilizes BOP.

Keywords: Floating exchange rate; Balance of payments; VECM. (search for similar items in EconPapers)
JEL-codes: F10 F30 F31 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.econsciences.com/index.php/TER/article/download/1751/1761 (application/pdf)
https://journals.econsciences.com/index.php/TER/article/view/1751 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cvv:journ2:v:5:y:2018:i:3:p:285-307

Access Statistics for this article

Turkish Economic Review is currently edited by Bilal KARGI

More articles in Turkish Economic Review from EconSciences Journals Istanbul, Turkey.
Bibliographic data for series maintained by Bilal KARGI ().