Money supply and foreign exchange rates in Nigeria for the period of (2000-2014)
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Date
2016-03
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Publisher
Kampala International University, College of Economics and Management
Abstract
This study investigated the effect of money supply on foreign exchange rates in Nigeria. The study was guided by the following objectives: i) to establish the variation of money supply in Nigeria between 2000 and 2014; ii) to examine the variation in foreign exchange rates in Nigeria between 2000 and 2014; and iii) to find out the
relationship between money supply and foreign exchange rates in Nigeria between 2000 and 201 4.Dick Fuller Test was considered the most appropriate model for this study. This study used secondary data from the Central Bank of Nigeria statistical bulletin and annual reports (CBN 2000-20 14) and National Bureau of Statistics (NBS,
2000-2014). The study also explored cointegration, Vector Error Correction Mechanism (VECM) method, Pearson correlation coefficient and regression coefficient to establish the influence of money supply on foreign exchange rates. The study found that money supply has been steadily increasing for the past 1 5 years
while foreign exchange rates have been fluctuating from year to year. Furthermore, the study established a positive and significant correlation between money supply and foreign exchange rates. The study concluded that a simple monetary policy could be effective in emerging market economies in Nigeria if the Central Bank commits to the rule-prescribe growth target levels. The study further recommended that in order to avoid the inflationary impacts, the government should control the excessive expansion in broad money supply in Nigeria and should take appropriate steps to coordinate and harmonize monetary policies in Nigeria in order to facilitate the financial integration process.
Description
A thesis report submitted to the college of higher degrees and research in partial fulfillment of the requirements for the award of the Degree of Masters of Arts in Economics of Kampala International University
Keywords
Money supply, foreign exchange, Nigeria