Faculty of Social Sciences

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Browsing Faculty of Social Sciences by Author "ELUWOLE, Odunayo Oluwatosin."

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    External shocks, exchange rate regimes and macroeconomics performance in Nigeria (1970-2019).
    (Department of Economics, Faculty of Social Sciences. Obafemi Awolowo University., 2023) ELUWOLE, Odunayo Oluwatosin.
    This study appraised exchange rate policies and its implications for macroeconomic performance in Nigeria between 1970 and 2019; analysed the effect of external shocks on macroeconomic performance under exchange rate regimes in Nigeria and estimated the extent of exchange rate pass-through to domestic prices under different exchange rate regimes in Nigeria. It also investigated the sustainability of exchange rate regimes for macroeconomic stability in Nigeria. This were with a view to providing information on the most appropriate exchange rate regime for macroeconomic stability in Nigeria. The study used secondary data between 1970 and 2019. Quarterly data on exchange rate, oil price, money supply, trade openness, interest rate, inflation rate, industrial output, foreign inflation, foreign output, and foreign reserves were sourced from publications of World. Development Indicators (2020), CBN Statistical Bulletin (2020), International Financial Statistics (2020), British Petroleum (2020), and World Texas Institute (2020). The data collected were analysed using Structural Variance Autoregressive (SVAR) model, Non-linear Autoregressive. Distributed Lag (N-ARDL), and a two-state Markov-switching model. The results showed that over the long term, inflation stabilizes, while output increases under the flexible exchange rate, while inflation and output fluctuate widely under the fixed exchange rate regime. The results also revealed that the flexible exchange rate regime helps to insulate the Nigerian economy from external shocks in the long term than the fixed exchange rate regime. The results also reveal that exchange rate pass-through measures are lower under flexible exchange rate regime compared to the fixed exchange rate regime in Nigeria. Specifically, the results showed that exchange rate had a positive and statistically significant effect on inflation rate (t = 18.69, p < 0.05) in the long run under the fixed exchange rate regime; while exchange rate exerted a negative, and statistically significant effect on inflation (t = -1.53, p < 0.05) in the long run under the flexible exchange rate regime. Lastly, the results reveal that the flexible exchange rate regime lasts for a longer period than the fixed exchange rate regime, and thus engender macroeconomic stability. Specifically, the fixed exchange rate regime lasted only for 2 quarters (t= 12.05, p < 0.05) before it breaks, while the flexible exchange rate regime lasted for about 4quarters (t = 18.04, p < 0.05) before it breaks. The study concluded that the flexible exchange rate regime mitigates the impact of macroeconomic shocks and improves macroeconomic performance in Nigeria over the long term better than the fixed exchange rate regime.