Effects of Bilateral Real Exchange Rate on Sino-Nigeria Trade: An ARDL Cointegration Approach

Abstract

This research is motivated to scrutinise the effects of real bilateral exchange rate fluctuation on China-Nigeria bilateral trade, taking into consideration volatility and third country's bilateral exchange rate effect to determine their consequences. Due to its robustness in time series analyses, an ARDL approach to co-integration was used to determine the long-and short-runs effects. Both export and import were considered separately. Outcome revealed that Nigeria's import from China responds negatively to real bilateral exchange rate increase just as it does to its volatility. Her export to China reacts positively on both front, most especially in the short-run. Japan was integrated as a third country in this research due to her competing presence in Nigerian market. Third country's real bilateral exchange rate play prominent but negative role in China-Nigeria trade, and is mostly effective in the long-run. With the absolute value of the co-efficient of real bilateral exchange rate greater than one, depreciating the Naira against the Renminbi will tend to ameliorate the negative balance of trade Nigeria has with China. Finally, democratic regime was found to be very essential in enhancing international business.

Analysis of Exchange Rate Effect on Trade Balance in Pakistan

“…The rate of exchange and balance of trade have direct relation with each other. Results of the present study are in line with the results of Siddiqui and Akhtar (1999), Rashid and Asif (2010), Haseeb et al ( 2014), Prabhakar et al (2015), Irwan et al (2015), Sani et al (2016), Khan et al (2016), Khan and Ali (2016), Yien et al (2017), Shah et al (2016, Muhammad &Khan (2017), Masih andPervez (2018) and Bicudo and Azu (2018).…”

“…China has faced structural changes and economical transition in the exchange rate policy. Bicudo and Azu (2018) examine the special effects of bilateral real rate of exchange on Sino-Nigeria. This study uses ARDL model.…”

“…According to Halicioglu and Ferda (2008) finding the long term connection between effective real exchange rates and trade balance. According to Bicudo and Azu (2018) the effect of real bilateral exchange rate on China-Nigeria bilateral trade between countries and the volatility and third country bilateral exchange rate. The effects are determined on export and imports separately in short and long run.…”

Effect of International Crude Oil Prices on Nigeria’s Gross Domestic Product from (1985-2020)

“…Several econometric methods for data analysis, however, the method of analysis adopted in this study is the Auto-Regressive Distributed Lag (ARDL) method owing to its stability and consistency in time series analysis, therefore advantages of utilizing the ARDL technique cannot be overemphasized (Banerjee et al, 1998); Bicudo and Azu (2018) are a few out of many researchers that have supported the use of this technique relatively due to its numerous advantages relating to robustness in ascertaining the long-run and short-run coefficient of estimated parameters. Research scholars have questioned the efficacy of traditional co-integration techniques when data integration is not at the same level, and many others have rejected the use of Ordinary Least Square (OLS) for econometric analysis due to bias in some results.…”