IMPACT OF TRADE OPENNESS AND EXCHANGE RATE VOLATILITYON ECONOMIC GROWTH IN NIGERIA

Musa Nuhu

Abstract


This paper investigated the impact of   trade openness and   exchange rate volatility on economic growth in Nigeria for the period 1986-2019. The main objective of  the  study was to investigate  the effect of trade openness and  exchange rate volatility  on economic growth in Nigeria. To   achieve the objective, the generalized autoregressive conditional  heteroskedasticity  (GARCH)  and  autoregressive  distributed  lag  (ARDL) model  were  employed  for  the  analysis. The  study  used  annual  time  series  datasourced  from  CBN  Statistical  Bulletin  and  National  Bureau  of  Statistics  for  the period  under  investigation.   The    variables    employed  for  the    study  include  GDP  growth  rate    used  as  proxy  for  economic  growth  which  served  as  the  dependent  variable  while    trade  openness,  real  exchange  rate,  foreign  direct  investment  and  inflation rate  were  used as  the independent  variables.  Results  from ARDL model  showed    that    trade  openness   had  negative  and  significant    relationship  with  Nigeria’s economic growth both in the  short-run  and  long-run. The results from the GARCH model indicated the presence of volatility in the real exchange rate of naira with  its attendant implications on the Nigerian economy.  Based  on  the  findings,  the study recommended that the Central Bank of Nigeria should   stabilize the exchange rate of naira by controlling the high demand for foreign currency

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References


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