EXCHANGE RATE VOLATILITY AND DYNAMICS OF NON-OIL TRADE: Evidence From Nigeria
- Marius Ikpe
- Augustine C. Odo
- Sunday A. Okwor
- Uma E. Kalu
- ( paper pages. 25 - 49 )
Abstract
Motivated by the high prevalence of possible endogeneity bias among Nigerian specific studies, this study examined the effects of exchange rate volatility shocks on non-oil trade using the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) (p, q) andthe Vector Autoregressive (VAR) methods of analysis. Theoretically, the model for the study was founded on the relationship between trade and the size of price and foreign exchange elasticities of Nigeria and her trading partners. The result shows that non-oil import exhibited unending positive and negative swings in response to positive shocks on exchange rate volatility, as against a minimal negative effect on export which became muted after the third and half period. This suggests that exchange rate volatility is more relevant for thedetermination of non-oil import than export. On the basis of this, the study concluded that exclusive reliance on exchange rate adjustment as a policy management tool for non-oil trade can be counter-productive for Nigeria. As a result, the study recommended the establishment of industrial clusters to drive domestic production of internationally competitive non-oil products.
Citation
Marius Ikpe, Augustine C. Odo, Sunday A. Okwor, Uma E. Kalu.
2021.
"EXCHANGE RATE VOLATILITY AND DYNAMICS OF NON-OIL TRADE: Evidence From Nigeria"
The Nigerian Journal of Economic and Social Studies,
63 (1): 25 - 49.
JEL Classification
E32, E47, F14, F17
