IDEAS home Printed from https://ideas.repec.org/a/ris/ecoint/0713.html
   My bibliography  Save this article

The Impact of Exchange Rate Movements on Trade Balance in Nigeria’s Open-Economy - L’impatto delle variazioni dei tassi di cambio sulla bilancia commerciale della Nigeria

Author

Listed:

Abstract

The objective of this study is to examine the impact of exchange rate on Nigeria’s trade balance. Time series data on trade balance, external reserves, exchange rate, money supply and real GDP were used in the analysis and the data were subjected to unit root tests to determine their time series characteristics. Modern econometric procedures were used to provide empirical evidence. The error correction model results show that money supply, effective exchange rate and real GDP are negatively related to trade balance. Also external reserves is positively related to trade balance. Exchange rate movements and money supply are major factors in the determination of trade balance in Nigeria. The model has a good fit and 93 per cent of the variation in the trade balance is explained by the independent variables. Policy makers should encourage production, trade and commercial activities that will lead to sustaining a stable effective exchange rate. - Lo scopo di questo studio è esaminare l’impatto dei tassi di cambio sulla bilancia commerciale della Nigeria. Sono stati usati nell’analisi dati time series sulla bilancia commerciale, le riserve esterne, i tassi di cambio, la liquidità e il PIL lordo e i dati sono stati sottoposti a test di radice unitaria per determinare le loro caratteristiche. Avanzate procedure econometriche sono state applicate per fornire evidenze empiriche. I risultati dei modelli di correzione dell’errore mostrano che la liquidità, il tasso di cambio effettivo e il PIL reale sono negativamente correlati al saldo della bilancia commerciale. Inoltre le riserve esterne sono positivamente correlate alla bilancia commerciale. Le variazioni dei tassi di cambio e la liquidità sono i fattori maggiormente determinanti nella bilancia commerciale nigeriana. Il modello è robusto e il 93 percento delle variazioni nella bilancia commerciale sono spiegate dalle variabili indipendenti. La politica economica dovrebbe incoraggiare la produzione, il commercio internazionale e le attività commerciali che portano a sostenere un tasso di cambio reale stabile.

Suggested Citation

  • Obudah, Bodiseowei C. & Tombofa, Steve S., 2014. "The Impact of Exchange Rate Movements on Trade Balance in Nigeria’s Open-Economy - L’impatto delle variazioni dei tassi di cambio sulla bilancia commerciale della Nigeria," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 67(1), pages 111-125.
  • Handle: RePEc:ris:ecoint:0713
    as

    Download full text from publisher

    File URL: http://www.iei1946.it/RePEc/ccg/OBUDAH_TOMBOFA%20111_125.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Adubi, A.A. & Okunmadewa, F., 1999. "Price, Exchange Rate Volatility and Nigeria's Agricultural Trade Flows: a Dynamic Analysis," Papers 87, African Economic Research Consortium.
    2. Carmen M. Reinhart, 1995. "Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 290-312, June.
    3. Gylfason, Thorvaldur & Risager, Ole, 1984. "Does devaluation improve the current account?," European Economic Review, Elsevier, vol. 25(1), pages 37-64, June.
    4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    5. repec:aer:wpaper:26 is not listed on IDEAS
    6. Miles, Marc A, 1979. "The Effects of Devaluation on the Trade Balance and the Balance of Payments: Some New Results," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 600-620, June.
    7. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
    8. Egwaikhide, F.O., 1999. "Determinants of Imports in Nigeria: a Dynamic Specification," Papers 91, African Economic Research Consortium.
    Full references (including those not matched with items on IDEAS)

    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. Bilgin, Cevat, 2020. "Asymmetric Effects of Exchange Rate Changes on Exports: A Sectoral Nonlinear Cointegration Analysis for Turkey," MPRA Paper 101316, University Library of Munich, Germany.
    2. John Paleologos & Grigorios Bitzis, 2006. "Assessing the Effectiveness of the Exchange Rate Movements on the Greek Current Account Deficit: A Cointegration Analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 45-64.
    3. Shahe Emran, M. & Shilpi, Forhad, 1996. "Foreign exchange rationing and the aggregate import demand function," Economics Letters, Elsevier, vol. 51(3), pages 315-322, June.
    4. Fakhri, Hasanov, 2010. "The Impact of Real Effective Exchange Rate on the Non-oil Export: The Case of Azerbaijan," MPRA Paper 29556, University Library of Munich, Germany.
    5. Pavel Kadochnikov, 2006. "An Analysis of Import Substitution in Russia after the 1998 Crisis," Research Paper Series, Gaidar Institute for Economic Policy, issue 95, pages 148-148.
    6. Martha Misas A. & María Teresa Ramírez G. & Luisa Fernanda Silva E., 2001. "Exportaciones no tradicionales en Colombia y sus determinantes," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 19(39), pages 73-114, June.
    7. Rupa Duttagupta & Antonio Spilimbergo, 2004. "What Happened to Asian Exports During the Crisis?," IMF Staff Papers, Palgrave Macmillan, vol. 51(1), pages 1-4.
    8. Emerson Fernandes Marçal & Marislei Nishijima & Wagner Oliveira Monteiro, 2009. "Saldos Comerciais e Taxa de Câmbio Real: Uma Nova Análise do Caso Brasileiro," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 10(2), pages 333-356.
    9. Hassan Shirvani & Barry Wilbratte, 1997. "The Relationship Between The Real Exchange Rate and The Trade Balance: An Empirical Reassessment," International Economic Journal, Taylor & Francis Journals, vol. 11(1), pages 39-50.
    10. Carmen M. Reinhart & Vincent Raymond Reinhart, 2002. "What Hurts Emerging Markets Most? G3 Exchange Rate or Interest Rate Volatility?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 133-170, National Bureau of Economic Research, Inc.
    11. Haji Alias, Mohammad & Tang, Tuck & Othman, Jamal, 2001. "Aggregate Import Demand and Expenditure Components in five ASEAN Countries: An Empirical Study," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 35, pages 37-60.
    12. Luis Sastre, 2018. "Marshall-Lerner Condition and the Balance of Payments Constrained Growth: The Spanish Case," Review of Economics & Finance, Better Advances Press, Canada, vol. 13, pages 29-38, August.
    13. Nadezhda Ivanova, 2007. "Estimation of the Equilibrium Real Exchange Rate in Russia: Trade-Balance Approach," Working Papers w0102, New Economic School (NES).
    14. Tang, Tuck Cheong, 2003. "An empirical analysis of China's aggregate import demand function," China Economic Review, Elsevier, vol. 14(2), pages 142-163.
    15. Hernando Rendón Obando & Andrés Ramírez Hassan, 2005. "Condición Marshall-Lerner: una aproximación al caso colombiano, 1980-2001," Revista Ecos de Economía, Universidad EAFIT, April.
    16. Devarajan, Shantayanan & Go, Delfin S. & Hongyi Li, 1999. "Quantifying the fiscal effects of trade reform," Policy Research Working Paper Series 2162, The World Bank.
    17. Mohsen Bahmani & Hanafiah Harvey & Scott W. Hegerty, 2013. "Empirical tests of the Marshall-Lerner condition: a literature review," Journal of Economic Studies, Emerald Group Publishing, vol. 40(3), pages 411-443, May.
    18. M. Faruk Aydin & Ugur Ciplak & Eray M. Yucel, 2004. "Export Supply and Import Demand Models for the Turkish Economy," Working Papers 0409, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    19. Catao, Luis & Falcetti, Elisabetta, 2002. "Determinants of Argentina’s External Trade," Journal of Applied Economics, Universidad del CEMA, vol. 5(1), pages 1-39, May.
    20. M. Adetunji Babatunde & Festus O. Egwaikhide, 2010. "Explaining Nigeria's import demand behaviour: a bound testing approach," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 9(2), pages 167-187, July.

    More about this item

    Keywords

    Exchange Rate; Trade Balance; Real Growth; Money Supply;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

    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:ris:ecoint:0713. 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: Angela Procopio (email available below). General contact details of provider: https://edirc.repec.org/data/cacogit.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.