An Investigation of the Impact of Exchange Rate Policy on Manufacturing Sector Output: Evidence from Nigeria
Journal Title: IOSR Journal of Humanities and Social Science - Year 2018, Vol 23, Issue 8
Abstract
The study examined the impact of exchange rate policy on manufacturing output, using evidence from Nigeria for the period 1981-2016. Johansen cointegration test and Vector Error Correction (VECM) model were applied in the analysis. Time series data obtained from the Central Bank of Nigeria (CBN) statistical bulletin on manufacturing output (MOP), exchange rate (EXR), manufacturing sector capacity utilization (MCU) and import (IMP) were engaged in the investigation. After the necessary integration, co-integration and correcting the error in the estimated equation, a causality analysis via Granger causality test among the relevant variables was undertaken in order to verity the relevance of the exchange rate-led hypothesis to manufacturing sector output growth in Nigeria. The results revealed that growth increasing the quantity of naira exchanged for the dollar caused a fall in the manufacturing output in Nigeria. However, this impact was found to be insignificant. Thus, exchange rate volatility does have significant impact on the growth of manufacturing output in Nigeria. Hence, since exchange rate volatility was indicated to impact on manufacturing output in Nigeria significantly, the study recommends that the policy makers should vigorously pursue macroeconomic policies that will keep the exchange rate of the naira at a tolerably stable low rate. This would therefore, help in making Nigerian market more attractive to foreign investors; thus, improve the output growth of the manufacturing sector of the economy.
Authors and Affiliations
Celina Udude Chinyere Ph. D, Eze Onyebuchi Michael Michael, Atuma Emeka Ph. D
Keywords
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- EP ID EP419661
- DOI 10.9790/0837-2308038190.
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