External Reserves and Economic Growth in Nigeria: An Empirical Investigation

Lawrence O. Akinboyo, Babatunde Omotosho, Sunday Oladunni and Olamide H. Owolabi

MPRA Paper from University Library of Munich, Germany

Abstract: The paper examines the nexus between Nigeria’s foreign reserves and economic growth. Analysis of the data from 2000:Q1 - 2013:Q2, using the modified Wald statistic of Toda and Yamamoto (1995) confirms a unidirectional causality running from external reserves to economic growth. The Gregory and Hansen co-integration test also confirms the existence of a long run relationship between the variables, but with a structural break in 2009:Q4. We find that external reserves drive economic growth in Nigeria, both in the short and long term horizons. Results also show that a one per cent increase in external reserves leads to 0.15 per cent increase in economic growth. Since general macroeconomic stability has growth enhancing effects, the paper endorses the CBN routine interventions in the foreign exchange market aimed at ensuring stability of the exchange rate.

Keywords: Exchange reserves; co-integration; structural break; economic growth; causality (search for similar items in EconPapers)
JEL-codes: F31 F4 F43 O47 (search for similar items in EconPapers)
Date: 2016
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Published in West African Financial and Economic Review (WAFER) 1.14(2016): pp. 53-78

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:98309

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