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Title:Some theoretical and empirical issues in connection with the devaluation of the Nigeria naira
Authors:Olofin, S.ISNI
Akinkugbe, O.
Ajayi, IbiISNI
Periodical:The Nigerian Journal of Economic and Social Studies
Geographic term:Nigeria
Abstract:The case for and against devaluation of the Nigerian naira is examined from both a theoretical and an empirical perspective. Theoretical analysis of devaluation, from whatever approach (elasticity, absorption, monetary), offers no definitive guide as to when devaluation might be beneficial to a developing deficit country with internal adjustment problems. The results of empirical analysis simulating different devaluation scenarios within the framework of the CEAR-MAC IV macroeconometric model of the Nigerian economy suggest that the costs of devaluation, even when combined with the fiscal policy measure of expenditure reduction, would far outweigh any benefits that might be expected by way of internal and external adjustments. These findings must be qualified by the fact that the analysis is essentially short-run and monetary policy measures have not been given due consideration. Bibliogr., ref.