ASSESSING THE IMPACT OF REAL EXCHANGE RATE ON ECONOMIC GROWTH IN NIGERIA: A COINTEGRATION ANALYSIS
Authors:
Miftahu Idris
Abstract:
This study investigates the impact of real exchange rate on economic growth in Nigeria by assessing the long-run and the short-run impacts of the variables using the Johansen cointegration test and the Vector Error Correction Model (VECM). The analysis is based on the annual time-series data of the real exchange rate and the real GDP covering the sample period of 1980 to 2017. The result shows the existence of long-run and the equilibrium relationship between the variables under consideration. In addition, the model established the presence of positive and significant impact of exchange rate on the economic growth in Nigeria. As such, policymakers in Nigeria should be extremely critical in decision makings particularly on matters related to the exchange rate in order to benefit from its positive and valuable impact towards generating sustainable economic growth. A considerable and rational appreciation of the domestic currency is essential in encouraging rapid growth in the long-run period.