Impact of Monetary Policy on Exchange Rate Stability in Nigeria (Published)
This study investigates the impact of interest rates, money supply, and Central Bank reserves on exchange rate stability in Nigeria. Utilizing quarterly economic data from 1980 to 2023, sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin, the research employs a longitudinal survey design to assess the relationships between these monetary variables and exchange rate volatility. The findings indicate that interest rates, money supply, and Central Bank reserves significantly influence exchange rate fluctuations, with Central Bank reserves having the most substantial impact. Specifically, interest rates exhibit a moderate effect on exchange rate volatility (t = 3.513, p = .001, Beta = .342), while money supply also significantly affects exchange rate volatility (t = 2.713, p = .010, Beta = .305). Central Bank reserves, however, have the most pronounced impact (t = 4.141, p = .000, Beta = .467). These results highlight the critical role of monetary policy in maintaining exchange rate stability. The significant positive relationship between interest rates and exchange rate volatility suggests that monetary authorities should carefully consider the ramifications of interest rate adjustments. Similarly, the influence of money supply underscores the need for meticulous management to prevent destabilization. Robust Central Bank reserves emerge as a crucial buffer against exchange rate fluctuations, emphasizing the importance of effective reserve management policies. The findings provide actionable insights for policymakers aiming to enhance exchange rate stability through strategic interest rate policies, careful money supply management, and maintaining adequate Central Bank reserves.
Keywords: Central Bank of Nigeria., Economic Management, Exchange Rate Volatility, Interest rates., Monetary Policy, Money Supply, central bank reserves, exchange rate stability
The Impact of Exchange Rate Volatility on Industrial Export Performance in Sri Lanka: VECM Approach (Published)
Exchange Rate Volatility has had a significant effect on industrial export performance in Sri Lanka as a third world country. The Purpose of this paper is to examine the Exchange Rate Volatility on Export Performance based on the Industrial Sector in Sri Lanka for the Period of 2000 to 2017, using monthly data collected from EDB, CBSL, SLC & IMF. During the analysis VECM approach was incorporated into the study. Exchange Rate Volatility was calculated using SMA Model with LKR/USD return series. The study focused on 5 Export Trading Partners, United Kingdom, United States, India, Germany and Belgium with the limitation of five Export products. The main focus is to model Exchange Rate Volatility on Economic Growth using the determinants of Real Exports, Real Effective Exchange Rates, Real Exchange Rate Volatility, Weighted Average of Relative Price and Real Foreign Income for the analysis of Long Run Relationship. The resulting models may be used to produce forecasts in the Future. Results reveal that Real Effective Exchange Rates and Exchange Rate Volatility have a negative impact on Real Exports for the selected Exporting Partners in the long run. Finally, there is a significant relationship between Exports and the Exchange Rate Volatility
Keywords: Economic Growth. SMA, Exchange Rate Volatility, Industrial Exports, VECM Model
Exchange Rate Fluctuation and Inflation Targeting In an Open Economy: Econometric Approach (Published)
The study empirically evaluates the impact of exchange rate fluctuation on inflation targeting on the Nigerian economy. The study adopted annual times series data spanning a period of 43 years (1970 to 2012). The finding of our results suggests that the theoretical modelling requirements for all the variables used in the regression satisfy the statistical requirements that determine the choice of the statistical model. The result from the estimated long–run model shows that all the variables [interest rate (INTR) and exchange rate (EXCHR)] were statistically significant. The INTR positively influence the growth of INFR in the Nigerian economy while EXCHR negatively impact on the economy. Therefore, more concerted effort should employed by the federal government to stabilize the exchange rate as this will in turn lead to a positive impact of EXCHR on the economy. This will boost the country’s export as well as reduce import their by reduction inflation in the economy. In the light of the foregoing, we state that the financial sector does not operate in ambiance but in a macroeconomic environment. It is therefore necessary that the environment should be one that is amenable to contemporary market situations. We therefore recommend that in order to curb inflation through inflation targeting, efforts must be made towards gathering financial data at a more precise level such that majority of financial transactions is captured in the database. Also, lending rates in Nigeria should be made flexible while other means should be employed towards raising the value of the naira as this will reduce greatly the inflation rate in the country.
Keywords: Exchange Rate Volatility, Inflation Targeting, Open Economy, economic growth