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Does Exchange Rates Swings Affect Trade? Evidence from an Emerging Open Economy

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  • Adedeji Daniel Gbadebo

    (Department of Accounting Science, Walter Sisulu University, Mthatha, Eastern Cape, South Africa.)

Abstract

The volatility of the exchange rate is commonplace for every open economies. If excessive, it would have severe implications for the country s international trades. Using the ARDL and cointegration bound tests on quarterly data [2000:Q2 2022:Q3], the study empirically explore how exchange rate volatility and other macroeconomic variables impacts real exports and imports demands for Nigeria. The evidence identify cointegration and the trade parsimonious models disclose a negative as well as significant short run effects of the exchange rate volatility. The estimated convergence ECM regressions indicate that exchange rates volatility cause significant decline in real exports and imports in the long run. Under this circumstance, the study supposes measures that will curb fluctuations beyond economic fundamentals. In particular, monetary authority should expand periodic exchange rate intervention to curtail excessive swings. This should be maintained intuitively and regularly appraise to avoid creating any counter-productive response.

Suggested Citation

  • Adedeji Daniel Gbadebo, 2023. "Does Exchange Rates Swings Affect Trade? Evidence from an Emerging Open Economy," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 132-143, January.
    • Handle: RePEc:eco:journ1:2023-01-15
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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange rate volatility; International trade; ARDL model; Cointegration bound test; Parsimonious model;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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