Journal of Economics and Sustainable Development
Impact of Exchange Rate Undervaluation on Manufacturing Sector and Economic Growth in Nigeria
Abstract
This work investigated the consequences of undervaluation of exchange rate in Nigeria on the manufacturing output and economic growth between 1981 and 2019. Vector Error Correction Mechanism was employed and it was found from the impulse response function that real effective exchange rate does not significantly affect economic growth and it is negatively related with manufacturing output. Variance decomposition indicates that the contribution of real exchange rate to manufacturing declined all through. Recommended policies should address the structural bottlenecks in the country to enable supply become more elastic towards demand to enjoy the benefits of lowered prices from devaluation.
Key Words: Exchange Rate, Undervaluation, Manufacturing output, Economic Growth
DOI: 10.7176/JESD/12-20-07
Publication date:October 31st 2021
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ISSN (Paper)2222-1700 ISSN (Online)2222-2855
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