EFFECT OF INTEREST RATE ON EXCHANGE RATE MANAGEMENT IN NIGERIA
- Abdulhamid Auyo Musa
- Aliyu Rafindadi Sanusi
- ( paper pages. 1 - 295 )
Abstract
This study examined how a capital account (closed or open) affects the relationship between interest rate policy and exchange rate volatility in Nigeria. It utilized annual time series data sourced from Central Bank of Nigeria (CBN) and the World Development Indicators (WDI) from 1981 to 2017 to estimate an autoregressive distributed lag model (ARDL) using dummies. The findings of the study reveal that an increase in interest rate will depreciate the exchange in the long run (either in an open or a closed capital account setting) and also in the short run if the capital account is open. Therefore, it is recommended that interest rate should be used to manage short-term temporary pressure on exchange rate volatility in addition to enforcement of effective capital controls.
Citation
Abdulhamid Auyo Musa, Aliyu Rafindadi Sanusi.
2020.
"EFFECT OF INTEREST RATE ON EXCHANGE RATE MANAGEMENT IN NIGERIA"
The Nigerian Journal of Economic and Social Studies,
62 (3): 1 - 295.
JEL Classification
F3, F31, F38
