How Does Corruption Affect Currency Substitution? Evidence from Nigeria

Anthony Akinlo

Journal of Development Policy and Practice, 2022, vol. 7, issue 2, 221-242

Abstract: The article examines the impact of corruption on currency substitution in Nigeria over the 1986–2017 period, using the auto-regressive distributed lag and vector error-correction approaches. The results indicate that corruption and currency substitution are co-integrated. Moreover, corruption promotes currency substitution in the short run, which confirms the safe-haven hypothesis. An increase in income leads to an increase in currency substitution, which further supports the safe-haven hypothesis. Exchange rate depreciation tends to promote currency substitution, especially in the short-run. Finally, inflation and interest rate promote currency substitution in Nigeria. Therefore, it would be necessary for policymakers to explore ways of reducing corruption, ensure macroeconomic stability, foster the equitable distribution of growth and promote productivity to enhance savers’ confidence in the local currency.

Keywords: Corruption; currency substitution; bounds test; exchange rate; Nigeria (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/24551333221086332 (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:sae:jodepp:v:7:y:2022:i:2:p:221-242

DOI: 10.1177/24551333221086332

Access Statistics for this article

More articles in Journal of Development Policy and Practice
Bibliographic data for series maintained by SAGE Publications ().