IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v8y2024i7p128-141.html
   My bibliography  Save this article

Analysis of Exchange Rate Fluctuations on Economic Growth in Nigeria

Author

Listed:
  • Dr. David Ogwuche

    (Bingham University, Nasarawa, Nigeria)

  • Jeremiah M. Tule

    (Bingham University, Nasarawa, Nigeria)

  • Racheal L. Jeremiah Dandaura

    (Bingham University, Nasarawa, Nigeria)

  • Gabriel Akogwu

    (Bingham University, Nasarawa, Nigeria)

  • Emmanuel O. Nkpubre

    (Bingham University, Nasarawa, Nigeria)

Abstract

Motivated by the 2023 exchange rate reforms that led to significant depreciation of the domestic currency and macroeconomic instability, the paper examines the effect of exchange rate fluctuations on economic growth in Nigeria, using quarterly data from 2010:1 to 2023. The nonlinear autoregressive distributed lag approach was employed to analyse real GDP, exchange rate, crude oil price and macroeconomic instability. The overall result suggests a long run relationship between exchange rate and economic growth. The short run dynamic shows past and current exchange rate depreciation have positive and significant impact on economic growth while the past value of exchange rate depreciation exacts a negative and significant influence on growth. The results also reveal that positive oil price has stimulated economic growth while structural break has negative and strong effect on economic growth. The long-run result shows that both positive oil price and macroeconomic stability have positive effect on economic growth. This highlights the significance of oil price when assessing the relationship between exchange rate and economic growth in Nigeria. The paper recommends that the central bank should review sectoral credit policy to encourage lending to the productive sectors of the economy. The government should intensify economic reforms to diversify the economy by investing in the mining and agricultural sector with emphasis on refined and finished products. The government should address structural imbalance by building sustainable roads, rails, while policy related issues should be designed and carefully implemented to avoid shocking the economy.

Suggested Citation

  • Dr. David Ogwuche & Jeremiah M. Tule & Racheal L. Jeremiah Dandaura & Gabriel Akogwu & Emmanuel O. Nkpubre, 2024. "Analysis of Exchange Rate Fluctuations on Economic Growth in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(7), pages 128-141, July.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:7:p:128-141
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-8-issue-7/128-141.pdf
    Download Restriction: no
    File URL: https://rsisinternational.org/journals/ijriss/articles/analysis-of-exchange-rate-fluctuations-on-economic-growth-in-nigeria/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
    2. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    3. Fayyaz Ahmad & Muhammad Umar Draz & Su‐Chang Yang, 2019. "China's economic development: does exchange rate and FDI nexus matter?," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 33(2), pages 81-93, November.
    4. Chaker Aloui & Besma Hkiri & Shawkat Hammoudeh & Muhammad Shahbaz, 2018. "A Multiple and Partial Wavelet Analysis of the Oil Price, Inflation, Exchange Rate, and Economic Growth Nexus in Saudi Arabia," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(4), pages 935-956, March.
    5. John Weeks, 2008. "A Note on Mundell-Fleming and Developing Countries," Working Papers 155, Department of Economics, SOAS University of London, UK.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Antonia López Villavicencio & Josep Lluís Raymond Bara, 2006. "The short and long-run determinants of the real exchange rate in Mexico," Working Papers wpdea0606, Department of Applied Economics at Universitat Autonoma of Barcelona.
    2. Abbas Ali Chandio & Yuansheng Jiang & Jam Ghulam Murtaza Sahito & Fayyaz Ahmad, 2019. "Empirical Insights into the Long-Run Linkage between Households Energy Consumption and Economic Growth: Macro-Level Empirical Evidence from Pakistan," Sustainability, MDPI, vol. 11(22), pages 1-17, November.
    3. Yasmeen Bayaa & Mahmoud Qadan, 2024. "Interest rate uncertainty and the shape of the yield curve of U.S. treasury bonds," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 14(4), pages 981-1003, December.
    4. Muğaloğlu, Erhan & Kuşkaya, Sevda & Aldieri, Luigi & Alnour, Mohammed & Hoque, Mohammad Enamul & Magazzino, Cosimo & Bilgili, Faik, 2023. "Dynamic regime differences in the market behavior of primary natural resources in response to geopolitical risk and economic policy uncertainty," Resources Policy, Elsevier, vol. 87(PB).
    5. Akosah, Nana Kwame & Alagidede, Imhotep Paul & Schaling, Eric, 2020. "Testing for asymmetry in monetary policy rule for small-open developing economies: Multiscale Bayesian quantile evidence from Ghana," The Journal of Economic Asymmetries, Elsevier, vol. 22(C).
    6. Matteo Mogliani, 2010. "Residual-based tests for cointegration and multiple deterministic structural breaks: A Monte Carlo study," Working Papers halshs-00564897, HAL.
    7. J. Cuñado & L. Gil-Alana & F. Gracia, 2009. "US stock market volatility persistence: evidence before and after the burst of the IT bubble," Review of Quantitative Finance and Accounting, Springer, vol. 33(3), pages 233-252, October.
    8. Vincent Dekker & Karsten Schweikert, 2021. "A Comparison of Different Data-driven Procedures to Determine the Bunching Window," Public Finance Review, , vol. 49(2), pages 262-293, March.
    9. Bernard, Jean-Thomas & Idoudi, Nadhem & Khalaf, Lynda & Yelou, Clement, 2007. "Finite sample multivariate structural change tests with application to energy demand models," Journal of Econometrics, Elsevier, vol. 141(2), pages 1219-1244, December.
    10. Su, Tong & Lin, Boqiang, 2024. "Reassessing the information transmission and pricing influence of Shanghai crude oil futures: A time-varying perspective," Energy Economics, Elsevier, vol. 140(C).
    11. Garrod Brian & Almeida António & Machado Luiz, 2023. "Modelling of nonlinear asymmetric effects of changes in tourism on economic growth in an autonomous small-island economy," European Journal of Tourism, Hospitality and Recreation, Sciendo, vol. 13(2), pages 154-172, December.
    12. repec:rza:wpaper:029 is not listed on IDEAS
    13. Dammak, Wael & Frikha, Wajdi & Souissi, Mohamed Naceur, 2024. "Market turbulence and investor decision-making in currency option market," The Journal of Economic Asymmetries, Elsevier, vol. 30(C).
    14. Shernaz Bodhanwala & Harsh Purohit & Nidhi Choudhary, 2020. "The Causal Dynamics in Indian Agriculture Commodity Prices and Macro-Economic Variables in the Presence of a Structural Break," Global Business Review, International Management Institute, vol. 21(1), pages 241-261, February.
    15. Wu, Kai & Zhu, Jingran & Xu, Mingli & Yang, Lu, 2020. "Can crude oil drive the co-movement in the international stock market? Evidence from partial wavelet coherence analysis," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    16. Abbas Alavirad & Sanhita Athawale, 2005. "The impact of the budget deficit on inflation in the Islamic Republic of Iran," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 29(1), pages 37-49, March.
    17. Brown, William Jr. & Burdekin, Richard C.K. & Weidenmier, Marc D., 2006. "Volatility in an era of reduced uncertainty: Lessons from Pax Britannica," Journal of Financial Economics, Elsevier, vol. 79(3), pages 693-707, March.
    18. Vicente Esteve & Manuel Navarro-Ibáñez & María A. Prats, 2013. "The present value model of US stock prices revisited: long-run evidence with structural breaks, 1871-2010," Working Papers 04/13, Instituto Universitario de Análisis Económico y Social.
    19. Blasques, F. & Francq, Christian & Laurent, Sébastien, 2024. "Autoregressive conditional betas," Journal of Econometrics, Elsevier, vol. 238(2).
    20. Luminita Stevens, 2020. "Coarse Pricing Policies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(1), pages 420-453.
    21. Kumar, Nikeel Nishkar & Patel, Arvind, 2023. "Nonlinear effect of air travel tourism demand on economic growth in Fiji," Journal of Air Transport Management, Elsevier, vol. 109(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:8:y:2024:i:7:p:128-141. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.