The Determinants of Real Exchange Rate Volatility in Nigeria

Ajao Mayowa G, Igbekoyi Olushola E.


The naira exchange rate depreciation and volatility is among the vast macroeconomic maladjustments which have unfolded in the Nigerian economy in the recent past. This paper investigates the determinants of real exchange rate volatility in Nigeria from 1981 through 2008. Having obtained the volatility of exchange rate through the GARCH (1,1) techniques, the ECM was used to examine the various determinants of exchange rate volatility in Nigeria, while the co-integration analysis reveals the presence of a long term equilibrium relationship between REXRVOL and its various determinants. Our empirical analysis further shows that openness of the economy, government expenditures, interest rate movements as well as the lagged exchange rate are among the major significant variables that influence REXRVOL during this period. This study recommends that the central monetary authority should institute policies that will minimize the magnitude of exchange rate volatility while the federal government exercises control of viable macroeconomic variables which have direct influence on exchange rate fluctuation.

DOI: 10.5901/ajis.2013.2n1p459

Full Text: PDF

Licenza Creative Commons
This work is licensed under Creative Commons Attribution 3.0 License.

Academic Journal of Interdisciplinary Studies ISSN 2281 3993(Print) ISSN 2281-4612(Online)

Copyright © MCSER-Mediterranean Center of Social and Educational Research

To make sure that you can receive messages from us, please add the '' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders..