Causality between External Reserves, Economic Growth,Import, Money Supply and Public Debt Servicing: Evidence from Nigeria

Abstract

The issue of International Reserves have taken a prominent place among scholars over the years, basically due to the importance of globalization. International transactions to a great extent depends on foreign reserves, which in turn is a function of production (GDP). This reserves determines a nation’s capacity to import, as well as the power of her currency. This paper examine the importance of holding international reserves and the causal relationship existing between the reserves maintenance, economic growth and import. The study discovered that foreign reserves improve economic growth in Nigeria as an insurance and interventionist mechanism, as well as also, ascertaining that within the short and long run periods a reduction on import greatly improve the nation’s foreign reserves. The study recommended among others the need to reduce import, especially on consumption and frivolities, for there to be an improvement on foreign reserves and by extension GDP.

Keywords: Foreign Reserves, Economic Growth, Import and Granger Causality