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Exchange Market Pressure, and the Magnitude of Exchange Market Intervention Index in Nigeria

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  • Nadani, Abdulrahman Abdullahi
  • Sulaimain, Usman Ali

Abstract

Using monthly data from January 2004 to December 2022 and the two-stage least squares (2SLS) method to estimate the money demand and price equation, this study constructs the exchange market pressure (EMP) and the intervention index for Nigeria by utilising the (Weymark, 1995) model. Findings indicate the value of the Naira is mostly under pressure to depreciate. Notwithstanding the monetary authority's intervention to pressures of appreciation or depreciation, the intervention index indicates absorption of the pressure by the exchange rate (EXR), which is in tandem with floating regime. Hence, the study agrees with the IMF's (2022) Exchange rate Arrangement for as well as Reinhart & Rogoff's (2004) exchange rate analysis for Nigeria. The analysis also revealed the anticipated (EXR) is more erratic than the actual exchange rate.

Suggested Citation

  • Nadani, Abdulrahman Abdullahi & Sulaimain, Usman Ali, 2024. "Exchange Market Pressure, and the Magnitude of Exchange Market Intervention Index in Nigeria," African Journal of Economic Review, African Journal of Economic Review, vol. 12(4).
    • Handle: RePEc:ags:afjecr:362930
    DOI: 10.22004/ag.econ.362930
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    1. Girton, Lance & Roper, Don, 1977. "A Monetary Model of Exchange Market Pressure Applied to the Postwar Canadian Experience," American Economic Review, American Economic Association, vol. 67(4), pages 537-548, September.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 1-48.
    3. Frenkel, Jacob A. & Aizenman, Joshua, 1982. "Aspects of the optimal management of exchange rates," Journal of International Economics, Elsevier, vol. 13(3-4), pages 231-256, November.
    4. Weymark, Diana N., 1995. "Estimating exchange market pressure and the degree of exchange market intervention for Canada," Journal of International Economics, Elsevier, vol. 39(3-4), pages 273-295, November.
    5. Ogiogio, G.O., 1996. "A Statistical Analysis of Foreign Exchange Rate Behaviour in Nigeria's Auction," Papers 49, African Economic Research Consortium.
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