The Effect of Macroeconomic Variables on Manufacturing Sector Output In Nigeria

Filed in Economics Project Topic by on October 20, 2020

The Effect of Macroeconomic Variables on Manufacturing Sector Output In Nigeria

ABSTRACT

The study is an attempt to investigate the impact of macroeconomic variables on manufacturing sector output in Nigeria.

In particular, the study examined the impact of exchange rate and inflation rate on the manufacturing sector performance in Nigeria.

In order to achieve this, the study estimated a multiple linear regression econometric model using annual time series data of manufacturing output, average capacity utilization, credit to the manufacturing sector, inflation rate, exchange rate and interest rate ranging from 1981 to 2015.

The result of the study established that in the period under review, inflation rate and the exchange rate has a statistically significant negative impact on manufacturing output in Nigeria.

The study, therefore, recommends inflation targeting policies that seek to keep inflation at its barest minimum while encouraging output growth and the adoption of floating exchange rate regimes that allow for the accommodation of external shocks while maintaining a tight monetary policy to minimize the risk of imported inflation.

INTRODUCTION

The manufacturing sector operates within the internal and external environments of business.  The internal environments are within a firm such that the prevailing factors are most times very subject to the control of the managers.

The external environment has to do with the larger business environments in which the manufacturing sector operates; and the factors therein are not subject to the control of the managers.

The factors in the external environment not subject to the control of a manager generally can be regarded as macro-economic factors or variables.

Since corporate managers cannot control the macro economic variables the government can control them through several policies.

REFERENCES

Abdullahi, I.B. (2011) Sectorial Analysis of Risks and Returns of the Quoted Firms in the Nigerian Capital Market. Unpublished Ph.D. thesis Submitted to University of Ilorin, Nigeria pp.53-124.

Ahmed, S. (2008) Aggregate Economic Variables and Stock Markets in India. International Research Journal of Finance and Economics Vol. 14: 14165.

Altay, E. (2003) The Effect of Macroeconomic Factors on Asset Returns: A Comparative Analysis of the German and Turkish Markets in an APT Framework. Martin-Luther-Universitat Halle, Betviebswirschaftliche Diskussionbatrage Nr. 84/2003.

The Effects of Macroeconomic Factors on the Nigerian Stock Returns: A Sectoral Approach IV. Methodology

Beenstocks, M.& Chen, K. (1988) Economic Forces in the London Stock Market. O x ford Bulletin of Economics and Statistics . Vol. 50 (1): 27 39.

Journal of Finance Vol. 38: 2239. Brown, S.J. & Weinstein, M.I. (1983) A New Approach to Testing Asset Pricing Models: The bilinear paradigm. Journal of finance volume 38 : 22- 39

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