Open AccessExchange Rate Fluctuation and Inflation Nexus in Nigeria: The Case of Recent Recession
Author(s) -
Ismaila Akanni Yusuf,
Mohammed Bashir Salaudeen,
Isaac Azubuike Ogbuji
Publication year - 2022
Publication title -
journal of economic impact
Language(s) - English
Resource type - Journals
eISSN - 2664-9764
pISSN - 2664-9756
DOI - 10.52223/jei4012209
Subject(s) - economics , exchange rate , inflation (cosmology) , nexus (standard) , distributed lag , depreciation (economics) , monetary economics , currency , recession , macroeconomics , monetary policy , econometrics , market economy , physics , capital formation , financial capital , theoretical physics , computer science , embedded system , human capital
The erratic performance of the Nigerian economy has generated theoretical and empirical debate in the literature. For instance, while some scholars have posited that inflation and currency depreciation positively influence a country’s economy, others believe the contrary. This leads to the interaction of both the exchange and inflation rates to arrive at an innovative conclusion. Hence, this study examines the effects of both indicators and their interactive effect of the country’s performance in the regulation era between 1986 to 2019, using the autoregressive distributed lag estimation technique. The empirical findings reveal that the interaction of inflation and exchange rate has a negative impact on the economy in the short run, but it is positive in the long run. Thus, the monetary authority should proactively control the foreign exchange rate movement to curtail the recent surge in inflation and boost the performance of the country’s economy.