Does Exchange Rate Depreciation and Trade Balance Impede Economic Growth in Nigeria?
The Nigerian currency has experienced a significant depreciation due to its exchange with foreign currencies, particularly the dollar. This exchange rate depreciation affects purchasing power, real wages, foreign trade, debt servicing, macroeconomic stability, and interest rates. The study then seek...
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Universitas Airlangga, Departemen Ilmu Ekonomi Fakultas Ekonomi dan Bisnis
2024-12-01
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| Series: | JIET (Jurnal Ilmu Ekonomi Terapan) |
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| Online Access: | https://e-journal.unair.ac.id/JIET/article/view/52444 |
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| author | Adeyemi Michael Anagun Peter Minasu Agosu |
| author_facet | Adeyemi Michael Anagun Peter Minasu Agosu |
| author_sort | Adeyemi Michael Anagun |
| collection | DOAJ |
| description | The Nigerian currency has experienced a significant depreciation due to its exchange with foreign currencies, particularly the dollar. This exchange rate depreciation affects purchasing power, real wages, foreign trade, debt servicing, macroeconomic stability, and interest rates. The study then seeks to fill a knowledge gap on the asymmetric link between exchange rate depreciation, trade balance, and economic growth in Nigeria. The Phillip-Perron and Augmented Dickey-Fuller unit root tests found mixed stationarity, whereas the ARDL bound cointegration test revealed a long-term link between these variables. As such, the study revealed that the depreciation of the exchange rate and trade balance positively affects economic growth. As the currency weakens, interest rates and money supply rise, and the economic growth rate rises. The study uses the error correction model to correct the disequilibrium by 59.8% to correct this economic hardship in the Nigerian economy, demonstrating that exchange rate depreciation considerably influences economic growth in the long run but not in the short term. Therefore, the practical implication is that the cost of production, importation, and inflation is high, causing fiscal restraints, governmental regulations, and economic shocks to macroeconomic stability, which may all influence economic growth. They recommend that interest rates be readjusted and that the government give grants and non-interest rate loans to small and medium enterprises to mash up with the import and export of consumable goods. |
| format | Article |
| id | doaj-art-2f3221b0934e4b77a4fcfd69026f8613 |
| institution | OA Journals |
| issn | 2541-1470 2528-1879 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | Universitas Airlangga, Departemen Ilmu Ekonomi Fakultas Ekonomi dan Bisnis |
| record_format | Article |
| series | JIET (Jurnal Ilmu Ekonomi Terapan) |
| spelling | doaj-art-2f3221b0934e4b77a4fcfd69026f86132025-08-20T02:36:15ZengUniversitas Airlangga, Departemen Ilmu Ekonomi Fakultas Ekonomi dan BisnisJIET (Jurnal Ilmu Ekonomi Terapan)2541-14702528-18792024-12-019217118410.20473/jiet.v9i2.5244450604Does Exchange Rate Depreciation and Trade Balance Impede Economic Growth in Nigeria?Adeyemi Michael Anagun0https://orcid.org/0000-0002-5183-799XPeter Minasu Agosu1https://orcid.org/0000-0002-5183-799XDepartment of Economics Education, Lagos State University of Education, NigeriaDepartment of Economics Education, Lagos State University of Education, NigeriaThe Nigerian currency has experienced a significant depreciation due to its exchange with foreign currencies, particularly the dollar. This exchange rate depreciation affects purchasing power, real wages, foreign trade, debt servicing, macroeconomic stability, and interest rates. The study then seeks to fill a knowledge gap on the asymmetric link between exchange rate depreciation, trade balance, and economic growth in Nigeria. The Phillip-Perron and Augmented Dickey-Fuller unit root tests found mixed stationarity, whereas the ARDL bound cointegration test revealed a long-term link between these variables. As such, the study revealed that the depreciation of the exchange rate and trade balance positively affects economic growth. As the currency weakens, interest rates and money supply rise, and the economic growth rate rises. The study uses the error correction model to correct the disequilibrium by 59.8% to correct this economic hardship in the Nigerian economy, demonstrating that exchange rate depreciation considerably influences economic growth in the long run but not in the short term. Therefore, the practical implication is that the cost of production, importation, and inflation is high, causing fiscal restraints, governmental regulations, and economic shocks to macroeconomic stability, which may all influence economic growth. They recommend that interest rates be readjusted and that the government give grants and non-interest rate loans to small and medium enterprises to mash up with the import and export of consumable goods.https://e-journal.unair.ac.id/JIET/article/view/52444currency depreciationeconomic growthexchange ratetrade balance |
| spellingShingle | Adeyemi Michael Anagun Peter Minasu Agosu Does Exchange Rate Depreciation and Trade Balance Impede Economic Growth in Nigeria? JIET (Jurnal Ilmu Ekonomi Terapan) currency depreciation economic growth exchange rate trade balance |
| title | Does Exchange Rate Depreciation and Trade Balance Impede Economic Growth in Nigeria? |
| title_full | Does Exchange Rate Depreciation and Trade Balance Impede Economic Growth in Nigeria? |
| title_fullStr | Does Exchange Rate Depreciation and Trade Balance Impede Economic Growth in Nigeria? |
| title_full_unstemmed | Does Exchange Rate Depreciation and Trade Balance Impede Economic Growth in Nigeria? |
| title_short | Does Exchange Rate Depreciation and Trade Balance Impede Economic Growth in Nigeria? |
| title_sort | does exchange rate depreciation and trade balance impede economic growth in nigeria |
| topic | currency depreciation economic growth exchange rate trade balance |
| url | https://e-journal.unair.ac.id/JIET/article/view/52444 |
| work_keys_str_mv | AT adeyemimichaelanagun doesexchangeratedepreciationandtradebalanceimpedeeconomicgrowthinnigeria AT peterminasuagosu doesexchangeratedepreciationandtradebalanceimpedeeconomicgrowthinnigeria |