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Modeling Volatility and Daily Exchange Rate Movement in Nigeria

Author

Listed:
  • Ejem Chukwu Agwu Ph.D.*

    (Senior Lecturer, Department of Banking and Finance, Abia State University, Uturu, Nigeria)

  • Ogbonna Udochukwu Godfrey Ph.D.

    (Senior Lecturer, Department of Management Sciences, Rhema University, Aba, Nigeria)

Abstract

This study modeled volatility and daily exchange rate movement in Nigeria with daily exchange rate between Nigeria Naira and US Dollar from January 2, 2001 to May 20, 2019 collected from the Central Bank of Nigeria (CBN). The results of the estimated models revealed that conditional variance (volatility) has positive and significant relationship with exchange rate returns between Nigeria Naira and US Dollars, which corroborates the theory that predicts positive relationship between return and volatility for risk averse investors. Also found that exchange rate volatility between Naira / US Dollar is persistent. It was also discovered that goods news produces more volatility than bad news of equal magnitude. The researchers therefore suggested that the Central Bank of Nigeria should always proffer timely intervention to reduce the volatility persistence. This will go a long way to counteract or moderate the excess volatility between Naira and US Dollar transactions.

Suggested Citation

  • Ejem Chukwu Agwu Ph.D.* & Ogbonna Udochukwu Godfrey Ph.D., 2019. "Modeling Volatility and Daily Exchange Rate Movement in Nigeria," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 5(11), pages 264-275, 11-2019.
    • Handle: RePEc:arp:ijefrr:2019:p:264-275
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    Cited by:

    1. Ejaz Aslam & Khuram Mobusher Azam & Anam Iqbal, 2021. "The Risk Analysis of Ṣukūk: An Empirical Evidence from Pakistan تحليل مخاطر الصكوك: أدلة تجريبية من باكستان," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 34(1), pages 25-43, January.

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