Review of: "Exchange Rate Pass-Through and Inflation on Unemployment in Nigeria

Path of Science , 2021

The attainment of full employment and price stability are one of the most widely used measures of economic health. Inflation and unemployment are an integral part of an economy; however, there is a need to balance both such that neither inflation nor unemployment is too high. The persistent rise in inflation and unemployment rates has called for the need to investigate the relevance of Philip's postulation of a trade-off between inflation and unemployment in Nigeria. In addition to the interdependency or independence of these variables, there is also a need to access factors that may contribute to the increasing inflation and unemployment rates in Nigeria. These will enable policymakers to formulate policies that affect inflation and unemployment and pay attention to other variables that may directly or indirectly affect inflation and unemployment. Therefore, the study aims to test the validity of Philip's curve hypotheses and examine possible causes of inflation and unemployment in Nigeria. The study used secondary data sourced from the Central Bank of Nigeria and the World Bank. Vector Autoregressive and Error Correction methods were adopted for the analysis. The study revealed that there is no significant relationship between inflation and unemployment in Nigeria. Inefficiencies from the government's side and insufficient domestic investment were observed to be the possible causes of unemployment, whereas; exchange rate depreciation and money supply are blamed for the rising price levels in Nigeria. The study concludes that the problems of inflation and unemployment arise from inefficiencies in both monetary and fiscal policies. Efficient use of fiscal and monetary policies was recommended to raise employment and output in all sectors to meet the steaming local demand and export. Also, the full implementation of economic diversification policies is recommended. Furthermore, the study recommends increasing government spending on social infrastructure and incentives to firms to promote investment in Nigeria. These will have an overall effect of increasing output, reducing unemployment and achieving non-inflationary growth in Nigeria.

Nigeria is a developing economy that has employed different policies in order to boost her economy and foreign exchange rate one of the macroeconomic variables is not left out. Therefore this study extracted data from the National Bureau of Statistics ranging from 1970 to 2019 employing the ADF unit root test, the ARDL and the Bound test to know the impact of the exchange reforms on Nigeria's economic growth in the short run with help of E-views software. The findings revealed that inflation and exchange rate has being on the increase in the past 49 years, however inflation was statistically insignificant although exchange rate was statistically significant. The study also found out that exchange rate reforms has impacted positively on Nigeria's economic growth. The study therefore recommended that: Government should put relevant economic policies in place to curb the rise in inflation; The reforms employed by government thus far have improved the economy, therefore government should monitor the policies already put in place in order to continue to boost the economy; and The rising inflation should be tame by government in order to prevent it from affecting exchange rate negatively.

2017

This paper seeks to re-examine the effect of exchange rate regimes on inflation in Nigeria. This is pertinent because exchange rate has remained devastated in Nigeria while the problem of high inflation lingers. Contrary to most studies on Nigeria, we tested the stability of our inflation model. We used the Autoregressive Distributed Lag (ARDL) approach for our analysis. The result shows that the past one year value of exchange rate has a negative and significant impact on the current inflation rate. Inflation rate increased more during the fixed exchange regime compared to the floating exchange rate regime. During the floating exchange rate regime, as the exchange rate increases, the inflation rate decreases and vice versa. The implication is that the floating exchange rate regime policy is preferable for combating increases in inflation rate compared to the fixed exchange rate. In addition, the lags of money supply have a direct relationship with inflation rate. The past two years...

International Journal of Family Business and Management

One of the serious challenges to Nigeria today is Unemployment. There have been many studies to investigate variables which affect unemployment in macroeconomics. Considering exchange rate volatility in recent years which has affected most of major variables of Nigerian economy, this paper investigated the relationship between Exchange rate and Unemployment in Nigeria using annual data of Thirty-one Years (1986 to 2017). In order to achieve the objective of the paper, Autoregressive Model with distributed Lag was used to find out the relationship between Real Exchange rate and Unemployment in the country. The Variables used are Unemployment rate, Real Exchange rate, Real Gross Domestic Product (RGDP), Export Value index; and Import Value index. It was found that Real Exchange Rate has positive effect on unemployment during the period. With high exchange rate, unemployment rate increases. The paper advises for efforts to increase supply of foreign exchange earnings in the country so ...

International Journal of Social Sciences Perspectives, 2019

This study explores the dynamic interaction between exchange rate, inflation and economic output in Nigeria between 1999 and 2017 using Vector Error Correction (VEC) granger causality test and Vector Error Correction Model (VECM). Results establish that there is unidirectional causality running from economic output (GDP) to exchange rate in Nigeria. The study further confirms that exchange rate significantly exerts a long run positive impact on economic performance in the country, while the impact of inflation on economic output in the long run is found to be negative. Furthermore, economic output exerts a negative impact on both inflation and exchange rate, but inflation positively influences exchange rate. Another evidence reveals that in the long run, exchange rate depreciation impacts positively on economic output, while inflation impacts negatively on output. The assertion that exchange rate depreciation leads to positive economic performance could be attributed to the positive long run effect of real sector development. Thus, the study suggests that policymakers should initiate measures that could aid financial and real sector development. Also, it is suggested that promoting the habit of consuming made in Nigeria goods, through awareness programmes and quality control measures could mitigate the inflationary effect of the external sector on Nigerian economy. Funding: This study received no specific financial support Competing Interests: The authors declare that they have no competing interests. Acknowledgement: We are very grateful for the comments of the anonymous reviewers, which have significantly improved the profoundness of analysis of the paper. We are particularly indebted to the editorial team of the journal for their professional assessment and constructive feedbacks in shaping the paper.

Journal of Economics and Sustainable Development, 2014

This study examined the effect of real Gross Domestic Product (GDP) on unemployment in Nigeria. Unemployment is a major problem in Nigeria, even with the recent growth rate of 7% the country is recording, unemployment is still on the increase. The study considers the period 1977 to 2011 to analyse the long run and shot run relationship between real gross domestic product and unemployment in Nigeria, with unemployment as a dependent variable. Besides the main variables for this study, other control variables particularly inflation was included in the model. The study has used Autoregressive Distributed Lag (ARDL) Model to test for ARDLbound co-integration test, the long run and the Error Correction Model (ECM). The co-integration bound test results showed that the variables are co-integrated at 5% level. The results revealed a positive relationship between unemployment and real GDP in Nigeria both in the short run and in the long run. The study concludes that real GDP growth causes unemployment in Nigeria and suggests that Nigeria as a country should reduce the over reliance on petroleum sector as a source of revenue and give more emphasis on other sectors, especially agricultural sector in order to provide more job opportunities to the Nigerian citizens. Also, the government should use the huge revenue it derives from the oil sector to develop other sectors like iron and steel sector, agriculture and so on. The government should also provide environment that will attract capital and investment, the government does not necessary create jobs but does aid the private sector in making job creation possible and imminent.

Journal of Economics and Development Studies, 2019

This paper empirically investigates the relationship between exchange rate and the Gross Domestic Product (GDP) in Nigeria from 1981 to 2017. The annual data was obtained from CBN statistical bulletin. Using the Auto-Regressive Distributed Lag (ARDL) co-integration procedure. The result indicates that GDP in Nigeria is not responsive to official exchange rate movement. A long run relationship was found to exist between GDP and official exchange rate, but not statistically significant. The Error Correction Mechanism (ECM) estimate was rightly signed but was found to have a short-run disequilibrium adjustment of less than 2% for correcting any deviation from long-run equilibrium. The models are found not to have serial correlation and also found to be stable meaning that the result is appropriate for policy consideration. It is therefore suggested that policy makers should not totally rely on exchange rate manipulation as an instrument to boost the economy, but should consider other economic variables to strengthen the GDP.

Global Journal of Management and Business Research

This paper investigates the causal relationship between exchange rate, balance of payment, external debt, external reserves, gross domestic product growth rate and inflation rate in Nigeria post Structural Adjustment Programme (SAP). Annual time series data 1987-2011 were used as the research sample period. The data were sourced from CBN Statistical Bulletin and Annual Reports of various years. We applied the ADF and PP unit root tests to check the stationarity of the variables. Gross domestic product growth rate and external reserve were stationary at both levels I (0) and I (1). The Johansen cointegration test, equation estimation and Granger causality tests were applied. Johansen cointegration result shows that there exists a long-run equilibrium relationship among the indicators. The Granger causality test between the dependent and independent variables shows a unidirectional causality from exchange rate to BOP, external reserves and gross domestic product growth rate. The independent variables indicate a unidirectional causality from • gross domestic product growth rate to external reserve. On the whole this paper has provided empirical evidence that there is a causal relationship between exchange rate and some macroeconomic indicators in Nigeria post SAP. These indicators however impact on the determination of exchange rate in Nigeria. Certain policy implications arise from this finding. It demonstrates the need for monetary authorities to learn from past exchange rate management and come up with a monetary policy framework that complimes the existing exchange rate policy and ensures stability.

Economics, 2015

Using Granger-causality approach, this study was intended to establish the relationship between exchange rate and inflation measured by CPI in South Sudan using time series monthly data for the period August 2011 to November 2014. The study reveals that there exists a unidirectional causality from exchange rate to CPI without feedback. This means depreciation of South Sudanese currency is detrimental to the economy of South Sudan. Although CPI failed to cause changes in exchange rate, there is no way to conclude with greater confidence that the results are true. The effect of the pressure of an increase in price level on exchange rate could have been from the response of monetary authorities in bridging the gap between the price level and the purchasing power of people in the economy. In South Sudan, with no response from the monetary authorities to increase money supply, the effect of increase in prices on exchange rate has been suppressed and only manifests itself in terms of suffering encountered by the economic actors with consumers and mainly the low-income consumers hit hard.Given the results, there is a need for the authorities to manage the exchange rate and save the domestic currency from depreciation. In search of more information, the study recommends further research to be conducted with the aim of establishing the weaknesses and strengths of South Sudan Central Bank management in carrying out effective monetary policies in the country.