Volume 4, Issue 1, 2016

Permanent URI for this collection

https://ir.unilag.edu.ng/handle/123456789/3796

Browse

Browsing Volume 4, Issue 1, 2016 by Subject "Exchange rate"

Now showing 1 - 2 of 2
  • Item
    Open Access
    Effect of Currency Devaluation on Macro - Economic Variables: The Nigerian Experience
    (University of Lagos Press, Akoka, 2016) Amah, P.N
    This paper investigates past exchange rate management regimes adopted by the Central Bank of Nigeria since 1959, and attempts to find out whether devaluation can be used to restore equilibrium and significantly achieve national economic growth and development. The Multiple Least Squares method was used to estimate coefficients of the identified relationships following one period lag and autoregressive models formulated to correct errors detected in the data of macroeconomic variables. Significantly, a negative and statistically significant relationship was found between exchange rate and non-oil exports. Devaluation had a negative cause-effect relationship with inflation. It was also negative and significant with national output in the one-year lag specification. Accordingly the paper recommends that devaluation should not be relied upon as a primary tool for restoration of macroeconomic balance. Instead, a system of managed float supported with strong trade and exchange controls should be used. Complementary fiscal policy measures should also be adopted.
  • Item
    Open Access
    Exchange Rate Volatility and Inclusive Growth: The Nigerian Experience
    (University of Lagos Press, Akoka, 2016) Babatunde, A
    This study investigates the influence of exchange rate volatility on inclusive growth in Nigeria, using a Vector Error Correction (VEC) estimation technique. The period of the study is 1981 to 2014. The study shows that volatility in exchange rate has increased the unemployment rate which has made the growth rate in GDP experienced over the years not to be inclusive. The volatility in exchange rate does not promote investment and create room for absorptive capacity in the economy. The results from the variance decomposition show that the total variance in exchange rate volatility is significant.Based on the above revelation, it is recommended that the monetary authority, Central Bank of Nigeria (CBN) should include in its policy objectives the pursuance of weak exchange rate targeting. Fixing exchange rate, at all costs, should be discouraged. This is because the policy of fixing exchange rate without regard for inflation is misguided. The policy of raising interest rates to control inflation without paying attention to what is happening to the exchange rate is counter productive. Nevertheless, flexibility in the exchange rate should be welcomed since it enables a country to cope with macroeconomic shocks arising from policy changes. Monetary authority should avoid unhealthy speculation in the foreign exchange, as well as a rent-seeking behaviour and adopt positive attitudes geared towards ensuring a stable naira exchange rate.