Impact of exchange rate depreciation on the balance of payments: Empirical evidence from Nigeria

Iyoboyi, Martins; Muftau, Olarinde

doi:10.1080/23322039.2014.923323

Cited by 27 publications

(26 citation statements)

References 12 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Our evidence, which show asymmetric cointegration and non-linear adjustment of the trade balance to exchange rate changes appear to be consistent with that of Duasa (2009) who find similar results for Malaysia and provide evidence against Igue and Ogunleye (2014), Iyoboyi and Muftau (2014) and Ogundipe et al (2013) among others who reported linear cointegration and symmetric adjustment of the trade balance to exchange rate changes in Nigeria. However, it is important to note that given the relatively short-sample size of our data calls into question the robustness of our results which suggest that they should to be interpreted with caution.…”

Section: Empirical Findingssupporting

confidence: 93%

“…It is important to note, however, that our results need to be interpreted with caution as our model specifications are not identical with that of Ogundipe et al (2013), Igue and Ogunleye (2014) and Iyoboyi and Muftau (2014) among others (who reported linear relationships between exchange rates and trade balance) and the data-sets and their frequencies are also not the same. Notwithstanding, our robustness tests are suggestive of the asymmetric and non-linearity in the adjustment process of the trade balance-exchange rates nexus in Nigeria at least since the introduction of an IFEM in 1999.…”

Section: Robustness Checkscontrasting

confidence: 53%

“…Although, there have been studies that examined the exchange rate-trade balance nexus in Nigeria (recent examples, include Iyoboyi & Muftau, 2014;Ogundipe, Ojeaga, & Ogundipe, 2013 among others), they did not depart from assuming a linear relationship between the variables. However, as noted above, such assumption may lead to wrong policy prescription if the trade balance reacts asymmetrically over exchange rate appreciations-depreciation cycles.…”

Section: Used Enders and Siklos (2001)'s Tar And M-tar Cointegration mentioning

confidence: 94%

See 2 more Smart Citations

Asymmetric cointegration between exchange rate and trade balance in Nigeria

Aliyu

Tijjani

2015

Cogent Economics & Finance

View full text Add to dashboard Cite

This paper empirically examines the long-run pass through of the official exchange rates into trade balance in Nigeria by means of threshold cointegration and asymmetric error correction modeling. The study provides evidence for non-linear cointegration between our variables of interest. The estimated asymmetric error correction models provide new evidence for slower transmission of exchange rate depreciations into the country's trade balance, which in turn appears to offer partial support for the Dutch disease hypothesis. This finding suggests that policy-makers cannot hope to use currency devaluation to improve the trade balance. It is recommended that policy-makers focus attention on diversification of the economy away from dependence on crude oil exports into productive manufacturing and non-oil exports, which will be vital in making the economy more competitive.

show abstract

Section: Empirical Findingssupporting

confidence: 93%

Section: Robustness Checkscontrasting

confidence: 53%

Section: Used Enders and Siklos (2001)'s Tar And M-tar Cointegration mentioning

confidence: 94%

See 1 more Smart Citation

Asymmetric cointegration between exchange rate and trade balance in Nigeria

Aliyu

Tijjani

2015

Cogent Economics & Finance

View full text Add to dashboard Cite

show abstract

“…As mentioned earlier, the second group of studies examine whether currency devaluations improve or worsen the trade balance. Some studies used aggregate data to examine the impact of currency devaluation on the trade balance (see for instance Yol and Baharumshah, , Ogundipe et al ., ; Iyoboyi and Muftau, ; Niyitegeka and Tewari, ; Edoun et al ., ) while others use disaggregate data (see Bahmani‐Oskooee and Cheema, ; Bahmani‐Oskooee et al ., ; Halicioglu, ). Among studies that used aggregate data, Yol and Baharumshah () analysed the effect of exchange rate changes on the bilateral trade balance of 10 African countries.…”

Section: Empirical Literaturementioning

confidence: 99%

“…With regard to Nigeria, which is the present case of analysis, a number of studies recently undertaken on the impact of currency devaluation (depreciation) seem to find mixed results (see, for instance, Ogundipe et al ., ; Iyoboyi and Muftau, ; Igue and Ogunleye, ; Aliyu and Tijjani, ; Akinlo and Lawal, ). Ogundipe et al .…”

Section: Empirical Literaturementioning

confidence: 99%

Nigeria: Should the Government Float or Devalue the Naira?

Eregha¹,

Ndoricimpa²,

Olakojo³

et al. 2016

African Development Review

View full text Add to dashboard Cite

The recent rapid fall in oil prices and its impacts on foreign exchange earnings and reserves in Nigeria has resulted in a number of internal and external imbalances putting serious threat to the stability of the economy. This study therefore examines whether devaluation or floating exchange rate regime is an option to consider given the recent challenges in the nation's policy space. A behavioural equilibrium exchange rate approach is used to determine the extent of exchange rate misalignment complemented with a structural vector autoregressive (SVAR) model to examine the impact of currency devaluation on trade balance, domestic output and inflation. The result reveals the existence of an overvalued currency misalignment in recent times; while there is weak evidence to support that devaluation will improve the trade balance. Hence, floating the currency will be an adequate policy option given the current reality. This is expected to boost investors’ confidence, creates needed automatic adjustment mechanism and makes the tradable goods sector more competitive, resulting in more favourable external balances. However, this requires a concerted effort at boosting the nation's supply capacity through implementation of structural reforms in both oil and the non‐energy sector to diversify Nigeria's production and export base.

show abstract

Towards an effective fiscal stimulus: Evidence from Botswana

Timuno

Eita

2020

Cogent Economics & Finance

View full text Add to dashboard Cite

While there is a general agreement on the effectiveness of fiscal stimulus, there is no consensus on which stimulus is better. To address this concern, this paper uses a Dynamic Stochastic General Equilibrium (DSGE) model to propose a fiscal stimulus that Botswana can adopt given the slowing mining productivity. The results suggest that short-run macroeconomic stabilisation can be achieved through a cut in labour taxes. This fiscal stimulus generates larger growth multipliers and contributes relatively more employment compared to a cut in consumption tax and increases in government spending. The findings also revealed that a cut in labour taxes improves trade balance, resulting in a greater accumulation of international reserves and has no Dutch disease effects. These results suggest the need for a labour tax policy reform. These results also offer some policy options for other developing countries, which may face similar fiscal risks in future.

show abstract

Impact of exchange rate depreciation on the balance of payments: Empirical evidence from Nigeria

Cited by 27 publications

References 12 publications

Asymmetric cointegration between exchange rate and trade balance in Nigeria

Asymmetric cointegration between exchange rate and trade balance in Nigeria

Nigeria: Should the Government Float or Devalue the Naira?

Towards an effective fiscal stimulus: Evidence from Botswana

Contact Info

Product

Resources

About