Open AccessDYNAMIC EFFECTS OF REMITTANCES ON EXTERNAL RESERVES IN NIGERIA: THE ROLE OF INFLATION AND STRUCTURAL BREAKS
Author(s) -
Ebenezer Adesoji Olubiyi,
Abiodun najeem Raheem,
Alade Ayodeji Ademokoya
Publication year - 2019
Publication title -
journal of humanities, social sciences and creative arts
Language(s) - English
Resource type - Journals
ISSN - 2315-747X
DOI - 10.51406/jhssca.v13i1.1934
Subject(s) - exchange rate , distributed lag , economics , monetary economics , inflation (cosmology) , autoregressive model , central bank , foreign exchange reserves , lag , short run , inflation rate , monetary policy , econometrics , computer network , physics , theoretical physics , computer science
This study provides additional information about the drivers of external reserves in Nigeria. The result using Autoregressive Distributed Lag (ARDL) model estimation approach for the period 1980-2015 shows that remittances, among other macroeconomic variables, increased external reserves in the short run but weakens it in the long run. Remittances depletes external reserves through its effect on inflation rate and the nonsterilized intervention of the Central Bank. Furthermore, regime shift to relatively floating exchange rate causes remittances to increase reserves. From the foregoing, it is important for the authorities to continue operating relatively flexible exchange rate, and curtail excessive spending of remittances.
Keywords: , , , , .
JEL Classification: F31, F24, C22, F31