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Exchange Rate Volatility and Macroeconomic Performance in Nigeria

In: Macroeconomic Analysis for Economic Growth

Author

Listed:
  • Kehinde Mary Mary Bello
  • David Oluseun Olayungbo
  • Benjamin Ayodele Folorunso

Abstract

The study examined the asymmetric relationship between exchange rate volatility and macroeconomic performance in Nigeria covering the period between 1986Q1 and 2019Q4. The Non-linear Generalised Autoregressive Distributive Conditional Heteroscedasticity (GARCH) model was employed. The study was motivated as a result of periodic increase in exchange rate of naira to a dollar and instability of macroeconomic variables in the economy. The presence of Autoregressive Distributive Conditional Heteroscedasticity (ARCH) effect established the use of non-linear GARCH models which showed that volatility was persistent over the period of study. Consequently, the result revealed that exchange rate volatility exhibited a positive relationship with trade balance, industrial output and inflation in the study period. Thus, good news prevailed more over bad news in the foreign exchange market. The study therefore recommended that monetary authorities in Nigeria should regulate exchange rate and macroeconomic variables in order to control the general price level in the economy.

Suggested Citation

  • Kehinde Mary Mary Bello & David Oluseun Olayungbo & Benjamin Ayodele Folorunso, 2022. "Exchange Rate Volatility and Macroeconomic Performance in Nigeria," Chapters, in: Musa Jega Ibrahim (ed.), Macroeconomic Analysis for Economic Growth, IntechOpen.
    • Handle: RePEc:ito:pchaps:243388
    DOI: 10.5772/intechopen.100444
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    More about this item

    Keywords

    Exchange rate volatility; non-linear GARCH; trade balance; industrial output; inflation; Nigeria;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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