An Evaluation of Foreign Exchange Intervention and Monetary Aggregates in Nigeria (1986- 2003)
AbstractThe paper investigates the impact of foreign exchange intervention in the Nigerian foreign exchange market using an Autoregressive Distributed Lag (ARDL) modeling approach. Quarterly time series data spanning 1986:1 to 2003:4 are used and a number of statistical tools are employed to verify this hypothesis. The study examines stochastic characteristics of each time series by testing their stationarity using Phillip Perron (PP) test. This is followed by performing cointegration test using Johansen technique. The existence of co-integration motivates us to estimate the error correction model for broad money, M2. The overall finding from all the techniques employed is that foreign exchange intervention in Nigeria is sterilized because the cumulative aid, which constitute part of foreign exchange inflows, and net foreign assets variables, which are proxies for intervention, are not significant. Thus, paper concludes by recommending, among others, that the use of stock of external reserves to support the exchange rate through increased funding of the foreign exchange market should be encouraged.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 3817.
Date of creation: 04 Jul 2007
Date of revision:
Nigeria; Foreign Exchange Intervention; Co-integration and Auto-regressive Distributed Lag;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
This paper has been announced in the following NEP Reports:
- NEP-AFR-2007-07-27 (Africa)
- NEP-ALL-2007-07-27 (All new papers)
- NEP-CBA-2007-07-27 (Central Banking)
- NEP-IFN-2007-07-27 (International Finance)
- NEP-MAC-2007-07-27 (Macroeconomics)
- NEP-MON-2007-07-27 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simatele, Munacinga C H, 2004. "Financial sector reforms and monetary policy reforms in Zambia," MPRA Paper 21575, University Library of Munich, Germany.
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