Assessment of Macroeconomic Indicators on Real Exchange Rate In Nigeria an Empirical Analysis
- September 13, 2019
- Posted by: RSIS
- Categories: IJRSI, Social Science
International Journal of Research and Scientific Innovation (IJRSI) | Volume VI, Issue VIII, August 2019 | ISSN 2321–2705
Assessment of Macroeconomic Indicators on Real Exchange Rate In Nigeria an Empirical Analysis
Haruna Tijjani Haruna
Federal University Gashua, Nigeria
I. INTRODUCTION
A persistent argument over what determines the choice of exchange rate system of a given country has been a subject of debate among scholars on different economies ranging from underdeveloped, developing and developed. Friedman (1953), in his study posits that floating rates and the presence of sticky prices would provide better protection from foreign shocks by allowing relative prices to adjust faster, supported by Mundell (1963), in a real shock scenario floating exchange rate system would be a best option, whereas, in the events of monetary shocks fixed exchange rate system is the best call option.
Thus, in determining the exchange rate system in a country, significant economic policies should be geared towards achieving controlled macroeconomic indicators. Williamson (1994), states that economic policies should be geared in the long run towards achieving real exchange rate at optimal and these are determined by appropriate values of macroeconomic indicators. Incidentally, in 1970s Bretton-Woods system experience a monetary fall and calls for floating exchange rates institution, as such the exchange rate volatility have become somehow extreme without any matching link to changes in the macroeconomic fundamentals.
However, for a country to achieve greater impact on its economic growth, it has to focus on the macroeconomic indicators, like the exchange rate, which is an important indication of a strong economy in the short and long run. Hence, exchange rate volatility and its stability influence the general economic activity of a country in terms of both investment and export (Caballero and combo, 1989). Policy measures with reference to Nigeria comprise creating a reliable long term capital sustainability streams, through a suitable exchange rate control and also determine consistent exchange rate levels and diversified economic prospect, this would weaken reliance on oil revenue source base.
