Long Run Impact of Exchange Rate on Nigeria's Industrial Output

IOSR - Journal of Economics and Finance, 6(5), 75-86 (2015)

12 Pages Posted: 12 Jan 2019

See all articles by Ebele Nwokoye

Ebele Nwokoye

Nnamdi Azikiwe University - Department of Economics

Nneamaka Ilechukwu

Southern Illinois University at Carbondale, Department of Economics

Date Written: October 01, 2015

Abstract

While many scholars have carried out a lot of research on the impact of exchange rate volatility and price shocks on economic growth, this study departs from previous studies and seeks to provide suggestions for Nigerian policy makers on the attainment of an ideal exchange rate necessary to boost industrialization and industrial output. The economies of all the countries of the world are linked directly or indirectly through asset and goods markets. This linkage is made possible through trade and foreign exchange. The price of foreign currencies in terms of a local currency (i.e. foreign exchange) is therefore important to the understanding of the growth trajectory of all countries of the world. The consequences of substantial misalignments of exchange rates can lead to output contraction and extensive economic hardship. These therefore, bring up the issue of an ideal exchange rate necessary for the achievement of a set of diverse objectives - economic growth, containment of inflation and maintenance of external competiveness. This study employed the use of the ordinary least square technique to examine the impact of exchange rate stability on industry output in Nigeria using annual time series data from 1980 to 2013. The result of the study showed that domestic capital, foreign direct investment, population growth rate, and real exchange rate were significant determinants of industrial output. The changes in external balance and inflation were of little or no consequences to industrial output. Based on the findings, the researcher recommended that conscious efforts should be made by government to fine-tune the various macroeconomic variables in order to provide an enabling environment that stimulates industrial output and eventual economic growth.

Keywords: economic growth, external competitiveness, exchange rate, industrial output, Nigeria

Suggested Citation

Nwokoye (nee Nwabude), Ebele and Ilechukwu, Nneamaka, Long Run Impact of Exchange Rate on Nigeria's Industrial Output (October 01, 2015). IOSR - Journal of Economics and Finance, 6(5), 75-86 (2015). Available at SSRN: https://ssrn.com/abstract=3305687

Ebele Nwokoye (nee Nwabude) (Contact Author)

Nnamdi Azikiwe University - Department of Economics ( email )

Enugu-Onitsha Expressway
Nnamdi Azikiwe University
Awka, Anambra
Nigeria

HOME PAGE: http://www.unizik.edu.ng/profile/nwokoyees

Nneamaka Ilechukwu

Southern Illinois University at Carbondale, Department of Economics ( email )

Carbondale, IL
United States

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