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Exchange Rate Volatility and Export Trade in Nigeria: An Empirical Investigation

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  • Aliyu, Shehu Usman Rano

Abstract

The paper seeks to quantitatively assess the impact of exchange rate volatility on non oil export flows in Nigeria. Theoretically, volatility-trade link is ambiguous, although a strand of studies reported inverse link between export flow and volatility. The paper employed fundamental analysis where the flow of non oil exports from the Nigerian economy is assumed to be predicated on fundamental variables: the naira exchange rate volatility, the US dollar volatility, Nigeria’s terms of trade (TOT) and index of openness (OPN). Empirical results showed presence of unit root at level, however, the null hypothesis of nonstationarity was rejected at first difference. Cointegration results revealed that a stable long run equilibrium relationship exists between non oil exports and the fundamental variables. Using quarterly observations for twenty years, vector cointegration estimate revealed that the naira exchange rate volatility decreased non oil exports by 3.65% while the same estimate for the US dollar volatility increased export of non oil in Nigeria by 5.2% in the year 2003. The paper recommends measures that would promote greater openness of the economy and exchange rate stability in the economy.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13490.

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Date of creation: 30 Oct 2008
Date of revision: 17 Feb 2009
Handle: RePEc:pra:mprapa:13490

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Keywords: exchange rate volatility; non oil exports; terms of trade; index of openness; unit root and cointegration analysis;

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Cited by:
  1. Ana María Iregui B. & Luis Fernando Melo V. & María Teresa Ramírez G. & Carmen Cecilia Delgado R., 2013. "El efecto de la volatilidad y del desalineamiento de la tasa de cambio real sobre la actividad de las empresas en Colombia," BORRADORES DE ECONOMIA 011106, BANCO DE LA REPÚBLICA.
  2. P., Srinivasan & M., Kalaivani, 2012. "Exchange Rate Volatility and Export Growth in India: An Empirical Investigation," MPRA Paper 43828, University Library of Munich, Germany.
  3. Ana María Iregui & Luis Fernando Melo V. & María Teresa Ramírez, 2013. "Efecto de la volatilidad y del desalineamiento de la tasa de cambio real sobre la actividad de las empresas en Colombia," Borradores de Economia 801, Banco de la Republica de Colombia.

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