Impact of real exchange rate on trade balance in Nigeria

bibliographic database
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Periodical article

Title:	Impact of real exchange rate on trade balance in Nigeria
Authors:	Igue, Nkenchor Neville Ogunleye, Toyin Segun
Year:	2014
Periodical:	African Development Review (ISSN 1467-8268)
Volume:	26
Issue:	2
Pages:	347-358
Language:	English
Geographic term:	Nigeria
Subjects:	exchange rates trade economic models
External link:	https://doi.org/10.1111/1467-8268.12086
Abstract:	The study investigated whether the depreciation of exchange rate has a favourable impact on trade balance in Nigeria, based on the Marshall-Lerner (ML) condition. The Johansen method of cointegration and vector error correction methodology (VECM) was employed to investigate the existence of a long-run relationship between trade balance and the specified set of independent variables. The results confirm the satisfaction of the Marshall-Lerner condition in Nigeria, implying that depreciation of the exchange rate has a positive effect on trade balance in the long run. The study also established that a one per cent depreciation in the exchange rate would improve trade balance by 1.16 per cent. In the light of these findings, the study recommends a gradual depreciation of the exchange rate, which should be accompanied with export policy that encourages domestic production of non-oil products for exports. Bibliogr., sum. [Journal abstract]