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Rivers State University, Port Harcourt.
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| Title: | Impact of Migrants’ Remittances and External Reserve on Exchange Rate Stability in Nigeria |
| Author(s): | ASONYE V. N. |
| Abstract: | Motivated by the continuous variations of exchange rate despite the intervention in the foreign exchange market, this study examined the contributions of external reserve and migrants’ remittances to exchange rate stability in Nigeria between 1980 and 2020. To achieve the specific objectives, time series data on the variables were obtained from the Central Bank Statistical Bulletin and World Development Indicators, and analyzed using descriptive statistics, unit root and bounds cointegration tests alongside asymmetric nonlinear autoregressive distributed lag (NARDL) model. The unit root test results showed evidence mixed integration in the series which are less than order two. Consequently, bounds cointegration test was applied and the result revealed that exchange rate stability has a long run relationship with external reserve and migrants’ remittances. The estimated asymmetric regression model showed that that exchange rate stability responds positive to both positive and negative changes in external reserve in the short run. This implies that increase in external reserve plays a substantial role in stimulating exchange rate stability. In addition, exchange rate stability responded negatively to negative changes in remittances inflow. This implies that decrease in remittances inflow has adverse implications on exchange rate stability during the study period. The error correction coefficient (0.983) appeared with the expected negative sign and it is statistically significant at 5 per cent level. This implies that the model can adjusts to long run equilibrium position at a speed of 98.3 per cent. Based on the findings, this study recommends that the government through the CBN should promote stable and robust growth of external reserve to create opportunities for stable and realistic exchange rate in Nigeria. |
| Keywords: | Migrants, Remittances, Reserve, Exchange Rate, Foreign Exchange Market |
| Journal: | Economic and Social Science Review (ESR) |
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