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Do real exchange rate changes have symmetric or asymmetric effects on trade balance in Nigeria? Evidence from Non-linear ARDL Model

Onatunji Olufemi

The Review of Finance and Banking, 2019, vol. 11, issue 1, 14-23

Abstract: This paper investigates the asymmetric impact of real exchange changes on trade balance in Nigeria using quarterly data over the period 1999Q1-2017Q4. A non-linear Autoregressive Distributed Lag (NARDL) proposed by Shin et al (2014) is employed for this study. The findings show that real exchange change have asymmetric impact on Nigeria’s trade balance in both time horizons. Specifically, the positive real exchange rate is highly sensitive to trade balance than the negative real exchange rate. These findings therefore suggest that using discretionary monetary policy to offset Nigeria’s trade deficit due to large differential between import and export is not sufficient enough. Thus, policy makers should adopt policy-mix to manage the current economic climate of the country such as imposition of quotas on certain imported goods, high tariff rate on imported goods, provision of credit facilities and higher tax rate that reduce disposable income of consumer.

Date: 2019
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