IDEAS home Printed from https://ideas.repec.org/a/ajo/ijbmfr/v5y2022i2p85-99id240.html
   My bibliography  Save this article

Foreign Exchange Reserves and Import Demand in a Developing Economy: New Evidence from Nigeria

Author

Listed:
  • Ubong Edem Effiong

Abstract

The attempt in this study has been to detect the influence of foreign exchange reserves on import demand in Nigeria. With data spanning from 2000 to 2020, we estimated the long-run and short-run import demand function using ‘fully modified ordinary least squares’ and ‘error correction model’ respectively after we established that our variables were integrated of the first order and that cointegration exists. The long-run import demand function pointed out that the effect of foreign exchange reserves on import demand is positive but insignificant but such effect turned negative and significant in the short-run. Import price was also noted to put forth a negative sway on import demand with its effect being significant. Income was observed to wield a positive long-run influence on import demand while the effect of exchange rate was positive and significant in the long-run but became negative and significant in the short-run. By the elasticity coefficients, income elasticity put forth a greater influence on import demand compared to every other variable with the coefficient being greater than unity. It therefore becomes pertinent for actions toward reducing the income coefficient to less than or equal to one to be instituted. It is critical that import demand management be regarded as an aspect of an inclusive stabilization strategy. Imports should be targeted as part of this effort to compensate for shortfalls in domestic production. Furthermore, strategies that reduce government spending or raise taxes (contractionary fiscal policy) could reduce income growth which is a chief driver of import demand.

Suggested Citation

  • Ubong Edem Effiong, 2022. "Foreign Exchange Reserves and Import Demand in a Developing Economy: New Evidence from Nigeria," International Journal of Business Management and Finance Research, Academia Publishing Group, vol. 5(2), pages 85-99.
    • Handle: RePEc:ajo:ijbmfr:v:5:y:2022:i:2:p:85-99:id:240
    as

    Download full text from publisher

    File URL: http://academiainsight.com/index.php/ijbmfr/article/view/240/145
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Birendra Bahadur Budha, 2014. "The Role of Expenditure Components in Nepal’s Import from India," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 15(1), pages 37-54, March.
    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. Bilgehan TEKİN, 2024. "Evaluating Economic Resilience: Lighting The Nexus Between Turkish Imports And Foreign Exchange Reserves," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 19(3), pages 257-271, December.

    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. Vacu, Nomfudo P. & Odhiambo, Nicholas M., 2020. "The Determinants of Import Demand in South Africa: An Empirical Investigation," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(1), pages 51-76.

    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:ajo:ijbmfr:v:5:y:2022:i:2:p:85-99:id:240. 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: Lucía Aguado (email available below). General contact details of provider: https://academiainsight.com/index.php/ijbmfr/ .

    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.