[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/wun/timjeb/tjebv09y2016i01a05.html
   My bibliography  Save this article

Econometric analysis of determinants of real effective exchange rate in Nigeria (1960-2015)

Author

Listed:
  • Waheed IBRAHIM

    (Al-Hikmah University, Ilorin, Nigeria)

Abstract
This study investigates the determinants of real effective exchange rate in Nigeria for the period between 1960 and 2015 using the vector error correction mechanism to separate long run from the short run fundamentals. The findings from the regression estimates revealed that; terms of trade, openness of the economy, net capital inflow and total government expenditure were the major long run determinants of real effective exchange rate in the country while variables such as; broad money supply (M2), nominal effective exchange rate, structural adjustment program dummy, June 12 crisis and change to civil rule dummies were revealed as the major short run determinants of exchange rate in Nigeria between 1960 and 2015. The study concludes by recommending that since the major variable of terms of trade (crude oil price) is out of the government control, the effect of shocks due to the fluctuations of crude oil price can be minimized by shifting the economy from a mono-product nation and diversify the economy to increase productive capacity. Also, the change to civil rule dummy used in the study revealed that the system has not been friendly with the country’s real effective exchange rate, thus needing to review the system and bringing out all negative activities there in to ensure Nigeria’s currency appreciation. Guided openness is also suggested to avert the danger that unguided trade liberalization may bring into the country.

Suggested Citation

  • Waheed IBRAHIM, 2016. "Econometric analysis of determinants of real effective exchange rate in Nigeria (1960-2015)," Timisoara Journal of Economics and Business, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 9(1), pages 62-80, June.
    • Handle: RePEc:wun:timjeb:tjeb:v09:y2016:i01:a05
    as

    Download full text from publisher

    File URL: http://tjeb.ro/index.php/tjeb/article/view/TJEB9-1_62to80/pdf
    Download Restriction: no
    File URL: http://tjeb.ro/index.php/tjeb/article/view/TJEB9-1_62to80
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Menzie Chinn, 2006. "A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation," Open Economies Review, Springer, vol. 17(1), pages 115-143, January.
    2. Jongwanich, Juthathip, 2009. "Equilibrium Real Exchange Rate, Misalignment, and Export Performance in Developing Asia," ADB Economics Working Paper Series 151, Asian Development Bank.
    3. John Williamson, 2009. "Exchange Rate Economics," Open Economies Review, Springer, vol. 20(1), pages 123-146, February.
    4. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, April.
    5. Elbadawi, Ibrahim A & Soto, Raimundo, 1997. "Real Exchange Rates and Macroeconomic Adjustment in Sub-Saharan Africa and Other Developing Countries," Journal of African Economies, Centre for the Study of African Economies, vol. 6(3), pages 74-120, Supplemen.
    6. Mr. Ronald MacDonald & Mr. Peter B. Clark, 1998. "Exchange Rates and Economic Fundamentals: A Methodological Comparison of BEERs and FEERs," IMF Working Papers 1998/067, International Monetary Fund.
    7. Shehu Usman Rano, Aliyu, 2007. "Real Exchange Rate Misalignment: An Application of Behavioral Equilibrium Exchange Rate (BEER) to Nigeria," MPRA Paper 10376, University Library of Munich, Germany.
    8. International Monetary Fund, 1999. "Exchange Rate Unification, the Equilibrium Real Exchange Rate, and Choice of Exchange Rate Regime: The Case of the Islamic Republic of Iran," IMF Working Papers 1999/015, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wai-Mun Har & Ai-Lian Tan & Chong-Heng Lim & Chai-Thing Tan, 2017. "Does Interest Rate Still Matter in Determining Exchange Rate?," Capital Markets Review, Malaysian Finance Association, vol. 25(1), pages 19-25.
    2. Zameelah Khan Jaffur & Boopen Seetanah & Noor-Ul-Hacq Sookia, 2020. "A cross-country analysis of the determinants of the real effective exchange rate in fifteen Sub-Saharan African countries," Economics Bulletin, AccessEcon, vol. 40(2), pages 1686-1697.
    3. Waqar Khalid & Javed Iqbal & Nosheen Nasir & Misbah Nosheen, 2024. "Do real exchange rate misalignments have threshold effects on economic growth? Asymmetric evidence from Pakistan," Economic Change and Restructuring, Springer, vol. 57(6), pages 1-40, December.
    4. Daren Conrad & Jaymieon Jagessar, 2018. "Real Exchange Rate Misalignment and Economic Growth: The Case of Trinidad and Tobago," Economies, MDPI, vol. 6(4), pages 1-23, September.
    5. Khalid, Waqar & Civcir, Irfan & Özdeşer, Hüseyin & Iqbal, Javed, 2023. "The asymmetric impact of real exchange rate misalignment on growth dynamics in Turkey," Journal of Policy Modeling, Elsevier, vol. 45(6), pages 1184-1203.

    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. Ahmed Derbali, 2021. "The misalignment of real effective exchange rate: Evidence from Tunisia," IHEID Working Papers 04-2021, Economics Section, The Graduate Institute of International Studies.
    2. Marie-Ange VEGANZONES-VAROUDAKIS & NABLI, 2002. "Exchange Rate Regime and Competitiveness of Manufactured Exports: The case of MENA Countries," Working Papers 200230, CERDI.
    3. Saang Joon Baak, 2015. "Is the Yen Undervalued?," Discussion papers 1503, ERINA - Economic Research Institute for Northeast Asia.
    4. Dosse Toulaboe, 2017. "Real exchange rate misalignment of Asian currencies," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 31(1), pages 39-52, May.
    5. Virginie Coudert & Cécile Couharde, 2009. "Currency Misalignments and Exchange Rate Regimes in Emerging and Developing Countries," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 121-136, February.
    6. Bouzid Amaira, 2021. "Real Effective Exchange Rate Misalignment of the Tunisian dinar," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 24(80), pages 2-23, June.
    7. Diego Bastourre & Luis Casanova & Alejo Espora, 2011. "Tipo de Cambio Real y Crecimiento: Síntesis de la Evidencia y Agenda de Investigación," Department of Economics, Working Papers 082, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    8. Baak, SaangJoon, 2012. "Measuring misalignments in the Korean exchange rate," Japan and the World Economy, Elsevier, vol. 24(4), pages 227-234.
    9. Claire Giordano, 2021. "How frequent a BEER? Assessing the impact of data frequency on real exchange rate misalignment estimation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(3), pages 365-404, July.
    10. Shehu Usman Rano, Aliyu, 2007. "Real Exchange Rate Misalignment: An Application of Behavioral Equilibrium Exchange Rate (BEER) to Nigeria," MPRA Paper 10376, University Library of Munich, Germany.
    11. Michael Fidora & Claire Giordano & Martin Schmitz, 2021. "Real Exchange Rate Misalignments in the Euro Area," Open Economies Review, Springer, vol. 32(1), pages 71-107, February.
    12. Saang Joon Baak, 2015. "Is the Yen Undervalued?," Discussion papers 1503e, ERINA - Economic Research Institute for Northeast Asia.
    13. Oliver Hossfeld, 2010. "Equilibrium Real Effective Exchange Rates and Real Exchange Rate Misalignments: Time Series vs. Panel Estimates," Working Papers 2010.3, International Network for Economic Research - INFER.
    14. Muhammad Zakaria, 2010. "Exchange Rate Misalignment And Economic Growth: Evidence From Pakistan'S Recent Float," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 55(03), pages 471-489.
    15. Saang Joon Baak, 2011. "Measuring Misalignments in the Korean Exchange Rate (ROK Economic System Series No.19)," Discussion papers 1102e, ERINA - Economic Research Institute for Northeast Asia.
    16. Kimolo, Deogratius & Mrema, Stanislaus, 2019. "Real Exchange Rate Misalignments in Tanzania," MPRA Paper 114672, University Library of Munich, Germany.
    17. Waheed, Muhammad, 2009. "Impact of real and nominal factors on long run equilibrium in Real Effective Exchange Rate (REER) in Pakistan," MPRA Paper 33169, University Library of Munich, Germany, revised Sep 2010.
    18. Shah Hussain, 2008. "Sources of Real Exchange Rate Misalignment Evidence from Pakistan," SBP Working Paper Series 26, State Bank of Pakistan, Research Department.
    19. ibrahim, waheed & Jimoh, Ayodele, 2012. "Real Exchange Rate and Real Effective Exchange Rate Measurement: Some theoretical Extensions," MPRA Paper 59428, University Library of Munich, Germany, revised 2013.
    20. Saang Joon Baak, 2011. "Measuring Misalignments in the Korean Exchange Rate (ROK Economic System Series No.19)," Discussion papers 1102, ERINA - Economic Research Institute for Northeast Asia.

    More about this item

    Keywords

    Innovation; innovative performance; creativity methods.;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    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:wun:timjeb:tjeb:v09:y2016:i01:a05. 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: Romeo Margea (email available below). General contact details of provider: https://edirc.repec.org/data/feuvtro.html .

    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.