The Determinants of Real Exchange Rate Volatility in Nigeria

The naira exchange rate depreciation and volatility is among the vast macroeconomic maladjustments which have unfolded in the Nigerian economy in the recent past. This paper therefore, investigates the determinants of real exchange rate volatility in Nigeria from 1981 through 2008. Having obtained the volatility of exchange rate through the GARCH (1,1) techniques, the ECM was used to examine the various determinants of exchange rate volatility in Nigeria, while the co-integration analysis reveals the presence of a long term equilibrium relationship between REXRVOL and its various determinants. Our empirical analysis further shows that openness of the economy, government expenditures, interest rate movements as well as the lagged exchange rate are among the major significant variables that influence REXRVOL during this period. This study recommends that the central monetary authority should institute policies that will minimize themagnitude of exchange rate volatility while the federal government exercises control of viable macroeconomic variables which have direct influence on exchange rate fluctuation.

Tadele Ferede
Abu Girma
Getnet Alemu
Demirew Getachew
Issue Date:
Aug 01 2016
Publication Type:
Journal Article
Published in:
Ethiopian Journal of Economics, Volume 24, Number 2
Page range:
JEL Codes:
F21; F31

 Record created 2017-07-13, last modified 2017-08-29

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