Macroeconomic Implications of Exchange Rate Depreciation: The Nigerian Experience

This study examines the macroeconomic implications of exchange rate depreciation in Nigeria. It employs the Autoregressive Distributed Lag Bounds Testing Cointegration approach for data covering the period of 1970 to 2015. Empirical results confirm that the Naira depreciation positively and signific...

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Bibliographic Details
Published in:Managing global transitions 2018-10, Vol.16 (3), p.235-258
Main Authors: Mesagan, Ekundayo P., Alimi, Olorunfemi Y., Yusuf, Ismaila A.
Format: Article
Language:English
Subjects:
Balance of trade
Currency
currency depreciation
Depreciation
Diversification
Efficient markets
Elasticity of demand
Exports
Fixed exchange rates
Foreign exchange rates
inflation rate
Inflation rates
interest rate
Interest rates
International trade
Macroeconomics
Money
output
Purchasing power parity
trade balance
Volatility
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Summary:This study examines the macroeconomic implications of exchange rate depreciation in Nigeria. It employs the Autoregressive Distributed Lag Bounds Testing Cointegration approach for data covering the period of 1970 to 2015. Empirical results confirm that the Naira depreciation positively and significantly impact all the indicators of macroeconomic performance except for output per capita, which is found to be insignificant. This implies that Naira depreciation stimulates trade balance; promotes price instability and increases the interest rate. Thus, currency depreciation does not benefit the country's economy. Moreover, the study confirms that long-run relationship exists between exchange rate depreciation and macroeconomic performance in Nigeria. Thus, there is the need for trade and export diversification to sustain gains from exchange rate movements and mitigate its negative effects on the economy.
ISSN:1854-6935
1581-6311
1854-6935
DOI:10.26493/1854-6935.16.235-258