Long-Run Effects of Exchange Rate Policy on Economic: A Case of Nigeria

Abstract

Very few erudite scholars of economists realised with conviction the intensely unusual, unstable, complicated, unreliable, temporary shock of exchange rate fluctuation in the economy. This study investigates the long run effects of exchange rate fluctuation on economic growth with particular emphasis on Nigeria between 1970-2012.The study identify the gap between recent economy theory and current economic reality in Nigeria using the Ordinary Least Square (OLS) regression techniques to draw out inferences on the exchange rate dynamics and growth. The Overall, finding, reported that real output is negatively influenced by exchange rate, gross capital formation and positively influenced by broad money supply and fiscal balances, suggesting that fiscal discipline exists but currency depreciation persist. In all, appropriate policy towards boosting the national output require stabilization of currency as well as encouraging investment.

JEL Classification: F31, F40, F49

Keywords: Long-run effects, exchange rate, macroeconomic indicators, economic growth in Nigeria.