Does Exchange Rates Swings Affect Trade? Evidence from an Emerging Open Economy


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Authors

  • Adedeji Daniel Gbadebo Department of Accounting Science, Walter Sisulu University, Mthatha, Eastern Cape, South Africa.

DOI:

https://doi.org/10.32479/ijefi.13929

Keywords:

Exchange rate volatility, International trade, ARDL model, Cointegration bound test, Parsimonious model

Abstract

The volatility of the exchange rate is commonplace for every open economies. If excessive, it would have severe implications for the country’s international trades. Using the ARDL and cointegration bound tests on quarterly data [2000:Q2–2022:Q3], the study empirically explore how exchange rate volatility and other macroeconomic variables impacts real exports and imports demands for Nigeria. The evidence identify cointegration and the trade’ parsimonious models disclose a negative as well as significant short run effects of the exchange rate volatility. The estimated convergence ECM regressions indicate that exchange rates volatility cause significant decline in real exports and imports in the long run. Under this circumstance, the study supposes measures that will curb fluctuations beyond economic fundamentals. In particular, monetary authority should expand periodic exchange rate intervention to curtail excessive swings. This should be maintained intuitively and regularly appraise to avoid creating any counter-productive response.

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Published

2023-01-14

How to Cite

Gbadebo, A. D. (2023). Does Exchange Rates Swings Affect Trade? Evidence from an Emerging Open Economy . International Journal of Economics and Financial Issues, 13(1), 132–143. https://doi.org/10.32479/ijefi.13929

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Articles