Modeling Exchange Rate Volatility and Economic Growth in Nigeria

Nsofor Ebele Sabina, Takon Samuel Manyo and Ugwuegbe Sebastine Ugochukwu
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Nsofor Ebele Sabina: Department of Banking and Finance Caritas University Emene Enugu
Takon Samuel Manyo: Department of Banking and Finance University of Calabar
Ugwuegbe Sebastine Ugochukwu: Department of Banking and Finance Caritas University Emene Enugu

Noble International Journal of Economics and Financial Research, 2017, vol. 2, issue 6, 88-97

Abstract: The study investigated exchange rate volatility in Nigeria and its effect on economic growth. The date employed in this study comprised of Exchange Rate, Gross Domestic Product, Government Expenditure, External Reserve, and Foreign Direct Investment which was generated from the Central Bank of Nigeria Statistical Bulletin covering the period of 1981-2015. The study employed GARCH (1,1) model in estimating the volatility of exchange rate in Nigeria and found persistence volatility in naira exchange rate with that of US Dollars. The study also employed the Generalized Method of Moments (GMM) in estimating the impact of volatility and economic growth in Nigeria and the result showed that volatility and FDI has negative and significant impact on the growth of the Nigerian economy. Government Expenditure and External Reserve has positive and significant impact on the growth of the Nigerian economy for the period under study. The study recommended that government and monetary authorities should design policies that will stabilize the persistence volatility in naira exchange rate as well as implement laudable economic policies that will help stimulate the domestic economy. The need to stimulate the interest of Nigerians in patronizing domestic products and services as against the current preference for imported products is hereby emphasized.

Keywords: Exchange Rate Volatility; Generalized Method of Moments; Generalized Autoregressive Condition Heteroskedasticity; External Reserve; FDI and Government Expenditure (search for similar items in EconPapers)
Date: 2017
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