Impact of Foreign Exchange Rate Fluctuations on Major Macroeconomic : Current School News

Impact of Foreign Exchange Rate Fluctuations on Major Macroeconomic Variables in Nigeria (1987-2011)

APPLY NOW 👉 WORK IN CANADA WITH FREE SPONSORSHIP!


 

Impact of Foreign Exchange Rate Fluctuations on Major Macroeconomic Variables in Nigeria (1987-2011).

Abstract

Foreign exchange volatility affects the performance of macroeconomic indicators positively and negatively. Most import-dependent economies like Nigeria face the problem of foreign exchange rate volatility.
Nigeria’s over-dependence in the oil and gas sector of the economy has affected the major macro economic variables, and adverse foreign exchange rate regimes have affected the Nigerian economy over the years.
Nigeria’s major foreign earning is from oil; hence, volatility of crude oil prices in the world market has made the economy highly susceptible to the ever changing exchange rates.
Nigeria’s failure to diversify its economy which would have helped cushion the effect of the constant changes in oil prices has made the country susceptible to fluctuations in exchange rate.
This has had a heavy toll on our foreign reserves and invariably on our balance of trade and balance of payment. A proper foreign exchange rate management in many ways strives to balance the level of imports with that of exports of goods that the country has comparative advantage.
Such balance is necessary for an economy to develop to levels beyond subsistence.
However, lack of government support for the real sector of the Nigerian economy as a result of its focus on foreign exchange earned from oil has also contributed immensely to the abysmal performance of the all other sectors especially the manufacturing sector.
Manufacturers, who account for substantial contributions to Nigeria’s gross domestic product before now have been unable to produce, hence fewer jobs, are created.
The Nigerian economy is in dire need of effective foreign exchange rate management that will aid its diversification, break the dominance of the oil sector, and give more opportunities to other sectors of the economy such as the manufacturing, agriculture, solid mineral mining etc and ultimately improve its balance of payment.

Table Of Contents

Title page                            I
Declaration.           ii
Approval page.             iii
Dedication.             iv
Acknowledgments.        v
Abstract.              vi
Table of Contents.             vii
List of Tables.             x
List of Figures.            ix
CHAPTER ONE      INTRODUCTION

  • Background of the . .         1
  • Statement of the . .              5
  • Objectives of the . .            7
  • Research . .           .           7
  • Research . .           .             7
  • Scope of the Study. . .           .        8
  • Significance of the . .           .     8

References.     .           .          10
CHAPTER TWO     REVIEW OF RELATED LITERATURE

  • Theoretical . .           .           .       12
    • Definition of Exchange . . .           .      12
    • Overview of Exchange Rate . . .              13
    • Foreign Exchange Management in . .           .      16
    • Types of Exchange Rate . .           .             18
    • Flexible Exchange Rate . .           .           .     18
    • Fixed Exchange Rate . . .           .           .        21
    • The Concept of Exchange Rate . . .           .  22
    • Determinants of Exchange Rate . .           .             24
    • Central Bank Intervention and Exchange Rate . . .           30
    • Monetary Policy and Macro-Economic Stabilization. . .   36
    • Foreign Exchange Rate Management and Transmission . 37
    • Exchange Rate Regimes and . .           39
    • Real Exchange Rate and . .           .      42
    • The Parallel Market and Economic . .        43
  • Empirical . .           .           49
    • Exchange Rate and Economic . .      49
    • Exchange Rate and Balance of . .          52
    • Exchange Rate and . . .              57
    • Exchange Rate and Foreign Direct . .     62
    • Exchange Rate and Investment. . .         68
    • Exchange Rate Fluctuations and International . .         69
    • Exchange Rate and . .           .        74
    • Exchange Rate and . .           .             76
    • Exchange Rate and Macroeconomic . .   77
    • Exchange Rate and Macroeconomic . .        82
    • Foreign Exchange Market and . .           83
    • Exchange Rate Systems and Economic .     85
    • Exchange Rate and Investment. . .           .      87
    • Foreign Exchange Rate and Interest . .           88
  • Review . .           .        91

References.     .           .   92
CHAPTER THREE  RESEARCH METHODOLOGY

  • Research . .          115
  • Nature and Sources of . .      115
  • Model . .          116

3.3.1    Model. .           .     116
3.3.2    Assumptions.  .           . 117

  • Description of . .     118
    • Dependent . . .      118
    • Independent . . .          119
    • Control . .           .   120
  • Techniques of . .             122

References.     .           .           123
CHAPTER FOUR    PRESENTATION AND ANALYSIS OF DATA

  • Presentation of . .           .           125

4.1.1    Prelude…               125

  • Test of . .           .            139
    • Test of Hypothesis One . .           .     139
    • Test of Hypothesis . .           .         140
    • Test of Hypothesis . .           .          141
    • Test of Hypothesis . .           .       142
  • Implication of . .           .      143

References.     .           .           .         148
CHAPTER FIVE     SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1       Summary of Findings..           .            150
5.2       Conclusion.     .           .              150

  • Recommendations. .              152
  • Contribution to Knowledge. .          153
  • Recommendations for Further . .     153

Bibliography. .           .        154

Introduction

Background Of Study
There is scarcely any country that lives in absolute isolation in this globalised world. The economies of all the countries of the world are linked directly or indirectly through asset or/and goods markets, made possible through trade and foreign exchange.
The price of foreign currencies in terms of a local currency is therefore important to understanding of the growth pattern of economies of the world.
The history of exchange rate systems in Nigeria is traceable to the early 1960s. According to Bakare (2011:3), …before the establishment of the Central Bank of Nigeria in 1958 and the enactment of the Exchange Control Act of 1962, foreign exchange was earned by the private sector and held in balances abroad by commercial banks that acted as agents for local exporters…
The oil boom experienced in the 1970s made it necessary to manage foreign exchange rate in order to avoid shortage. However, shortages in the late 1970s and the early 1980s compelled the government to introduce some ad hoc measures to control excessive demand for foreign exchange.
However, it was not until 1982 that a comprehensive exchange controls were applied. Then a fixed exchange rate system was in practice.
The increasing demand for foreign exchange and the inability of the exchange control system to evolve an appropriate mechanism for foreign exchange allocation in consonance with the goal of internal balance made it to be discarded in September 26, 1986 while a new mechanism was evolved under the Structural Adjustment Programmes (SAP).
The main objectives of exchange rate  policy under the Structural Adjustment Programmes were to preserve the value of the domestic currency, maintain a favourable external balance and the overall goal of macroeconomic stability and to determine a realistic exchange rate for the Naira.
In macroeconomic management, exchange rate policy is an important tool.This is derived from the fact that changes in the rate of exchange have significant implications for a country’s balance of payments position and even its income distribution and growth.

References

Aktar, M.A. and R.S Hilton (1984), “Exchange Rate Uncertainty and international Trade: Some conceptual issues and New Estimate for Germany and United States” Federal Research Bank of New York, Research Paper, 84 (3) 19-27
Arize, C.A., Osang, T. and D.J. Slottje (2000), “Exchange Rate Volatility and Foreign Trade: Evidence from Thirteen LDCs”, Journal of Business and Economic Statistics, 18(1), pp1–17
Ball, L. (1998), “Policy Rules for Open Economies” NBER Working Paper Series
Ball, L. (2000), “Policy Rules and External Shocks “ NBER NBER Working Paper Series
Baum, C. F., Mustafa, C., and N. Ozkan (2001), Exchange Rate Effects on the Volume of Trade Flows, An Empirical Analysis Employing High-Frequency Data, (Manuscript), Boston: Boston College Publishers
Bleaney, M. and D. Fielding (2002), “Exchange Rate Regimes, Inflation and Output Volatility in Developing Countries” Journal of Development Economics, 68(1), pp 233-245

APPLY NOW 👉 WORK IN CANADA WITH FREE SPONSORSHIP!


 

    Hey You!

    Don't Miss These Opportunity! Enter Your Details Below!


    => FOLLOW US ON INSTAGRAM | FACEBOOK & TWITTER FOR LATEST UPDATE

    Tags: , , , , , , ,

    Comments are closed.

    %d bloggers like this: