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Exchange Rate and Foreign Reserves Interface: Empirical Evidence from Nigeria

Author

Listed:
  • Ebere Ume Kalu
  • Ogochukwu E Ugwu
  • Victor Chijioke Ndubuaku
  • Ozioma Patricia Ifeanyi

Abstract

This work was set out to measure the responsiveness of foreign reserves to exchange rate variables with a focus on the Nigerian economy. Foreign reserve was used as a dependent variable and all the exchange rate related variables used as independent variables. Time series data spanning 1996 to 2016 was used. A combined use of the Auto Regressive Distributed Lag Model (ARDL) and correlation matrix were employed. It was found that a positively significant relationship exists between real exchange rate and reserves with nominal exchange rate sharing a positive but non-significant relationship with foreign reserves. This makes a case for proper policy direction in the management of exchange rate in a manner that produces the best economic results for the Nigerian economy. The results are considered useful for economies in the shape of Nigeria for generalization and policy direction in the management of foreign reserve and its interface with exchange rate and its related factors.

Suggested Citation

  • Ebere Ume Kalu & Ogochukwu E Ugwu & Victor Chijioke Ndubuaku & Ozioma Patricia Ifeanyi, 2019. "Exchange Rate and Foreign Reserves Interface: Empirical Evidence from Nigeria," The Economics and Finance Letters, Conscientia Beam, vol. 6(1), pages 1-8.
  • Handle: RePEc:pkp:teafle:v:6:y:2019:i:1:p:1-8:id:1615
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    Citations

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    Cited by:

    1. Abdurrauf Babalola, 2019. "Impact of International Liquidity on Foreign Exchange Rate in Nigeria: A Comparative Crosscheck," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(3), pages 105-111, September.
    2. Soro, Garbobiya Tuwe & Aras, Osman Nuri, 2021. "The Implication of Exchange Rate Volatility on Nigeria’s External Reserves: 1980-2020," MPRA Paper 108347, University Library of Munich, Germany.
    3. Terver Theophilus Kumeka & Olabusuyi Rufus Falayi & Adeniyi Jimmy Adedokun & Francis Olayinka Adeyemi, 2023. "Economic policy uncertainty and exchange market pressure in Nigeria: a quantile regression analysis," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 15(2), pages 135-166.
    4. Blessing Ose Oligbi Ph D & Milton A. Iyoha Ph D, 2021. "Estimating the Demand for International Reserves Function in Nigeria: Evidence from Vector Auto-Regressions," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(2), pages 97-108, February.

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