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Estimating the Demand for International Reserves Function in Nigeria: Evidence from Vector Auto-Regressions

Author

Listed:
  • Blessing Ose Oligbi Ph D

    (Ag Head, Department of Economics & Development Studies, Igbinedion University, Okada, Edo State, Nigeria.)

  • Milton A. Iyoha Ph D

    (Professor of Economics, University of Benin, Benin City, Nigeria)

Abstract

This study estimates the demand for international reserves function in Nigeria using vector auto-regressions, and annual time-series data for 1980-2017. The result obtained indicates that there is a stable, long- run relationship between international reserves, exports, openness, interest rate and export earnings volatility. Variance decomposition analysis shows the main sources of economic growth variations in Nigeria are attributable to “own shocks†and only slightly to other variables, namely, exports and openness. Thus, the study recommends that the government should adopt trade and exchange rate policies to promote exports in order to increase international reserve holdings and accelerate economic growth in Nigeria.

Suggested Citation

  • Blessing Ose Oligbi Ph D & Milton A. Iyoha Ph D, 2021. "Estimating the Demand for International Reserves Function in Nigeria: Evidence from Vector Auto-Regressions," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(2), pages 97-108, February.
    • Handle: RePEc:bcp:journl:v:5:y:2021:i:2:p:97-108
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    References listed on IDEAS

    as
    1. Williamson, John, 1973. "Surveys in Applied Economics: International Liquidity," Economic Journal, Royal Economic Society, vol. 83(331), pages 685-746, September.
    2. Ebere Ume Kalu & Ogochukwu E Ugwu & Victor Chijioke Ndubuaku & Ozioma Patricia Ifeanyi, 2019. "Exchange Rate and Foreign Reserves Interface: Empirical Evidence from Nigeria," The Economics and Finance Letters, Conscientia Beam, vol. 6(1), pages 1-8.
    3. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    4. Ebere Ume Kalu & Ogochukwu E. Ugwu & Victor Chijioke Ndubuaku & Ozioma Patricia Ifeanyi, 2019. "Exchange Rate and Foreign Reserves Interface: Empirical Evidence from Nigeria," The Economics and Finance Letters, Conscientia Beam, vol. 6(1), pages 1-8.
    5. Phillips, P C B, 1991. "Optimal Inference in Cointegrated Systems," Econometrica, Econometric Society, vol. 59(2), pages 283-306, March.
    6. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
    7. Iyoha, Milton Ame, 1976. "Demand for International Reserves in Less Developed Countries: A Distributed Lag Specification," The Review of Economics and Statistics, MIT Press, vol. 58(3), pages 351-355, August.
    8. Milton Ame. Iyoha, 1973. "The Optimal Balance‐of‐Payments Strategy of a Less Developed Country," The Economic Record, The Economic Society of Australia, vol. 49(2), pages 270-279, June.
    9. Edwards, Sebastian, 1985. "On the interest-rate elasticity of the demand for international reserves: Some evidence from developing countries," Journal of International Money and Finance, Elsevier, vol. 4(2), pages 287-295, June.
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