Economic Analysis of the Determinants of Exchange Rate in Nigeria
Economic Analysis of the Determinants of Exchange Rate in Nigeria
Abstract on Economic Analysis of the Determinants of Exchange Rate in Nigeria
This research study investigates the determinants of exchange rate in Nigeria and to establish the position of balance of payments and Gross Domestic Product from year 1980 to 2010. Though the fundamental problems to exchange rate and its determinants still persist.
The study therefore seeks primarily to analyze the determinants of foreign exchange by employing the ordinary least square method of estimation with the help of statistic package for social science (SPSS) version 17 with special references to the influence of inflation rate, money supply, balance. Of payment and Gross Domestic Product.
From the analyses, the results show the degree of variation among the variables. The co-efficient of determination was 0.673, which is 67.3 percent variation in exchange rate is accounted- for by the independent variables. Overall, the findings confirmed the hypotheses which states that high productivity differentials (GDP) leads-to exchange rate appreciation and inflation, money supply and balance of payments have impact on exchange rate. Thus, we propose policies that would preserve the international value of the domestic currency, maintain a favourable external reserves position and the overall goal of macroeconomic stability.