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Modelling the impacts of remittances on real exchange rate of Nigeria's Naira

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  • Augustine C. Osigwe
  • Kenneth O. Obi

Abstract

This study evaluated the impact of remittances on the real exchange rate of Nigeria's Naira. The results of the cointegration analysis indicated evidence of a long run relationship among the variables whereas the normalised cointegrating coefficients of the variables showed that all the variables significantly affect RER. We found that remittances received, measure of openness of the economy, nominal exchange rate, terms of trade, growth of RGDP positively impacted on RER in the long run. On the contrary, ratio of government consumption to GDP and price level negatively affected RER in the long run. The results for the estimated short run coefficients based on parsimonious error correction model revealed that REMIT had negative and significant relationship with RER in the first and third periods lag. The Breush-Godfrey serial correlation LM test indicated that the model of this study is not dogged by autocorrelation of any order.

Suggested Citation

  • Augustine C. Osigwe & Kenneth O. Obi, 2016. "Modelling the impacts of remittances on real exchange rate of Nigeria's Naira," African Journal of Economic and Sustainable Development, Inderscience Enterprises Ltd, vol. 5(1), pages 1-11.
    • Handle: RePEc:ids:ajesde:v:5:y:2016:i:1:p:1-11
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    References listed on IDEAS

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    1. Gazi M. Hassan & Mark J. Holmes, 2013. "Remittances and the real effective exchange rate," Applied Economics, Taylor & Francis Journals, vol. 45(35), pages 4959-4970, December.
    2. Adolfo Barajas & Ralph Chami & Dalia Hakura & Peter Montiel, 2011. "Workers’ Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 45-99, January.
    3. Lopez, Humberto & Molina, Luis & Bussolo, Maurizio, 2007. "Remittances and the real exchange rate," Policy Research Working Paper Series 4213, The World Bank.
    4. Mirzosaid Sultonov, 2011. "Impact of remittances on the real effective exchange rate of tajikistan's national currency," Economics Bulletin, AccessEcon, vol. 31(4), pages 1-57.
    5. Michael L. Mussa, 1984. "The Theory of Exchange Rate Determination," NBER Chapters, in: Exchange Rate Theory and Practice, pages 13-78, National Bureau of Economic Research, Inc.
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    1. Ilu, Ahmad Ibraheem, 2019. "Impact of Remittances from Nigerians in diaspora on Exchange rate Stability," MPRA Paper 97555, University Library of Munich, Germany, revised 01 Dec 2019.
    2. Musa Essayyad & Mercy Palamuleni & Chandrakala Satyal, 2018. "Remittances and Real Exchange Rates in South Asia: The Case of Nepal," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(10), pages 1226-1238, October.

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