Macroeconomic Implications of Exchange Rate Depreciation: The Nigerian Experience

Ekundayo Mesagan, Olorunfemi Alimi and Ismaila A. Yusuf
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Ismaila A. Yusuf: University of Lagos, Nigeria

Managing Global Transitions, 2018, vol. 16, issue 3 (Fall), 235-258

Abstract: This study examines the macroeconomic implications of exchange rate depreciation in Nigeria. It employs the Autoregressive Distributed Lag Bounds Testing Cointegration approach for data covering the period of 1970 to 2015. Empirical results confirm that the Naira depreciation positively and significantly impact all the indicators of macroeconomic performance except for output per capita, which is found to be insignificant. This implies that Naira depreciation stimulates trade balance; promotes price instability and increases the interest rate. Thus, currency depreciation does not benefit the country’s economy.Moreover, the study confirms that long-run relationship exists between exchange rate depreciation and macroeconomic performance in Nigeria. Thus, there is the need for trade and export diversification to sustain gains from exchange rate movements and mitigate its negative effects on the economy.

Keywords: currency depreciation; output; inflation rate; interest rate; trade balance (search for similar items in EconPapers)
JEL-codes: B22 E31 E43 F31 O40 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (9)

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DOI: 10.26493/1854-6935.16.235-258

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