TESTING LONG RUN RELATIONSHIP BETWEEN TRADE LIBERALIZATION AND EXCHANGE RATE IN NIGERIA: AN ARDL BOUND TEST APPROACH (1986-2023)
Ayodeji, Salihu and Musa, Mustapha Kuta
Volume 10 Issue 1
Abstract
This study examined the existence of long run relationship between trade liberalization and exchange rate in Nigeria over a period of 1986 to 2023, using annual time series data drawn from publication of World Bank annual data on nominal effective exchange rate (NEER), trade openness (TOP), terms of trade (TOT) and inflation rate (INFR). The data were estimated using Autoregressive Distributed Lag Model (ARDL) bound test approach to cointegration. The result revealed that there is long run relationship between trade liberalization and exchange rate in Nigeria. The ECM found to be negative with coefficient of 68% and statistically significant at 5% significant level, which is also another evidence confirming the existence of long run relationship between among the variables of study. Therefore, the Federal Government of Nigeria should strive to increase the value of the Naira as this will reduce the rate at which the naira is exchanged for the Dollar. Key words: ECM, Cointegration Test, Trade Liberalization, Exchange Rate.
Download Paper