An Econometrics Analysis of the Impact Exchange Rate on Economic Growth of Nigeria

The study interrogates the impact of exchange rate on the economic growth of Nigeria from 1981 to 2020 using quarterly time-series data from the Central Bank of Nigeria and the World Bank National Account. The dependent variable in the model was Real Gross Domestic Product (RGDP), and the independent variables were Exchange Rate (EXCHR), inflation (INFL), Interest Rate (INTR), Foreign Direct Investment (FDI), Broad Money Supply (M2) and Current Account Balance of Payment (CAB). The methodology employed was the Auto-Regressive Distributed Lag (ARDL) model which incorporates the Cointegration Bond test and Error-Correction Mechanism. The finding indicates that in the short run, EXCHR, CAB, M2 and FDI, had a positive impact on economic growth. The impact of EXCHR and CAB were significant on growth while that of M2 and FDI were insignificant to growth. However, INTR and INFL had a negative impact on economic growth with both variables being statistically significant. The bound test showed that there was a long-run relationship among the study variables, and the results from the long run reveal that the exchange rate has a positive and significant impact on economic growth. Inflation, Interest rate, FDI, Current Account Balance of Payment (CAB) and Broad Money Supply all have a positive and significant impact on economic growth. Based on the findings the study recommended that monetary authority should strictly monitor the operations of banks and other forex dealers with a view of ensuring unethical practices are adequately sanctioned to serve as a deterrent to others.

Factors affecting sukuk market development: empirical evidence from sukuk issuing economies

Purpose Both developed and developing countries, Muslim and non-Muslim, have been showing keen interest in sukuk financing. This interest was because of the lesson learned by both Asian and non-Asian economies that having a developed capital market is very essential to enable an economy resilient to the financial crisis. Therefore, this study aims to produce theoretical relationships and identify empirical support for the determinants of sukuk market development. Design/methodology/approach By using panel data analysis, the study covers the period from 1993 until 2017, and includes 13 sukuk issuing economies as per the availability of data. Findings The findings of the study revealed that the stage of economic development, banking system, money supply and current account balance are positively associated with sukuk market. Interestingly, economic size and exports appear to be negatively associated with sukuk. Practical implications To flourish the domestic sukuk market, authorities need to strengthen the existing financial system and economic development. Originality/value The study contributes in a limited body of knowledge on determinants of sukuk market development by exploring novel determining factors of foreign capital inflows as well as macroeconomic and financial factors.

Trade Balance and Oil Shocks in African Oil Exporting Countries

This paper is driven by the vast influence oil money have on the current account balance of major oil producing countries in Africa and the role policy measures could play to soften these effects. Dwelling on the nonlinear techniques, two types of Threshold Regression were used to estimate data on 8 African countries from 1995-2019. The results show evidence of nonlinear impacts of oil revenue on the current account balances of the 8 countries. The nature of the impact relies significantly on the levels of the threshold variable. Precisely, the estimated threshold benchmark for financial development was 33.34; below this threshold the sensitivity of current account balance to crude-oil shocks is higher and the probability of policy measures to mitigate the effects is low and, beyond the threshold the sensitivity of current account balance to crude-oil shocks is low and the probability of policy measure to mitigate the effects is higher. The finding suggested among others that crude-oil shocks is not the primary problem of the current account imbalance of oil-exporting countries rather the nature of the domestic economic policy environment.

The Essence of Relationships between the Crude Oil Market and Foreign Currencies Market Based on a Study of Key Currencies

Structural changes occurring in the crude oil market have stimulated the emergence of hypotheses suggesting that the relationship between prices of this raw material and the US dollar exchange rate can gradually become similar to that observed between oil prices and exchange rates of the currencies of the countries whose revenues from the export of this resource are a significant part of their current account balance. The purpose of this study was to determine and evaluate the time-varying dependence between oil prices and the exchange rate of the US dollar in the context of the same relationship for the Chinese, European, Japanese, Saudi, and Russian currencies. The results of our analyses implicate that a negative correlation between the variables in question grows stronger in time periods preceding global shocks and during thereof. The dominance of the USD in the crude oil market is reflected in similar characteristics of the correlations of the currencies of other countries, such as China, countries of the Euro area, or Japan. As for countries exporting crude oil, the situation varies. The results of our research suggest the lack of a stable relationships between prices of crude oil and currency exchange rates. It is also impossible to observe a long-term, unequivocal tendency of the currencies of oil exporting countries being positively correlated with oil prices. Russia was the closest to this situation. In Saudi Arabia, a positive correlation emerged during moments of crisis.

Determinants of Current Account Balance in ASEAN+6

The phenomenon of global current account imbalance has made researchers and policy makers provide more attention on current account issues. This phenomenon is illustrated by the US' current account deficit which continues to increase, while ASEAN+6 reaps a surplus. This study aims to study the factors that affect the aggregate current account in ASEAN+6 that have not been explained by previous studies. Based on the dynamic panel model (GMM) used, it was found that the variables Lagged-current account, ToT, Exchange Rate Stability, and Household Consumption have a significant effect on the aggregate current account in ASEAN+6. On the other hand, the REER and Government Expenditures do not have a significant effect on the ASEAN+6 current account. The benefit of this research is that it can be used for the formulation of current account policies to minimize the government's efforts to overcome a bigger issue: imbalance in balance of payment.Keywords: Current account balance, Generalized Method of Moment, ASEAN+6 Determinan Neraca Transaksi Berjalan di ASEAN+6Abstrak: Fenomena ketidakseimbangan transaksi berjalan global telah membuat para peneliti dan pembuat kebijakan memberikan perhatian lebih pada masalah transaksi berjalan. Fenomena ini tergambar dari defisit transaksi berjalan AS yang terus meningkat, sedangkan ASEAN+6 menuai surplus. Penelitian ini bertujuan untuk mempelajari faktor-faktor yang mempengaruhi neraca transaksi berjalan agregat di ASEAN+6 yang belum dijelaskan oleh penelitian-penelitian sebelumnya. Berdasarkan model panel dinamis (GMM) yang digunakan, ditemukan bahwa variabel Lagged-current account, ToT, Exchange Rate Stability, dan Household Consumption berpengaruh signifikan terhadap agregat current account di ASEAN+6. Di sisi lain, REER dan Belanja Pemerintah tidak berpengaruh signifikan terhadap transaksi berjalan ASEAN+6. Manfaat dari penelitian ini adalah dapat digunakan untuk perumusan kebijakan transaksi berjalan untuk meminimalkan upaya pemerintah mengatasi masalah yang lebih besar: ketidakseimbangan neraca pembayaran.Kata kunci: Neraca transaksi berjalan, Generalized Method of Moment, ASEAN+6

Credit Rating Agencies and Their Effects: An Analysis on Balkan Countries

The financial structure in the world has become more complex with the increase in global capital movements. For this reason, credit rating agencies have emerged as an important component of the financial structure. Standard and Poors, Moody's and Fitch are the three most important companies in this market. The grades given by these institutions highly affect the economic situation of the countries. In this study, information is given about credit rating agencies and it is aimed to measure the effect of the points given to countries by Standard and Poors, Moody's and Fitch, which are the most important of these institutions, on the economy. For this purpose, the effect of credit scores on the economic growth of Balkan countries except Kosovo was analyzed using panel data analysis method. In addition, unemployment, inflation, current account balance and budget balance data were included in the analysis. The findings obtained show that credit scores have an effect on the economic growth of countries.

The Effects of Global Value Chain Participation on Current Account Balances in African Economies: Does it Matter Being a Landlocked Country?: An Empirical Review

The general objective of this paper is to evaluate the effects of Global Value Chain Participation (GVCP) on Current Account Balance (CAB) in African countries. The specific objectives are to (1) identify the type of GVCP that contributes more significantly and positively to African countries’ current account balance and (2) find out whether being landlocked affects a country’s participation in global value chain in Africa. This paper uses panel data from three secondary sources: (1) UNCTAD-EORA database (2018) for forward and backward participation indicators, (2) WDI (2018) for current account balance, FDI, population and trade openness and (3) PWT 9.1 for exchange rates. In a linear panel specification, this research applies the Feasible Generalized Least Square (FGLS) econometric techniques and results highlight firstly that forward GVCP contributes more significantly and positively to CAB in Africa with a coefficient ranging between 1.64 and 2.43 in various regressions. Secondly, the effect of GVCP on CAB is reduced in landlocked African countries as revealed in its negative and significant coefficient of -2.33 as the variables are interacted. This paper recommends that, African countries should embark on forward participation and improve connectivity infrastructure to facilitate the participation of landlocked African economies in global interactions.

Does Capital Flight Affect Macroeconomic Performance in Nigeria?

This Study examined the effect of capital flight on macroeconomic performance in Nigeria for the period 1981 to 2019. It also ascertained the determinants of capital flight in Nigeria for the period 1981 to 2019. The error correction model was used for this study because the unit root test revealed all variables were stationary at first difference. This study utilized secondary data obtained from the World Bank dataset. The findings showed that external debt in the current period and the first lag, external debt in the current period, foreign direct investment in the current period, current account balance in the current period, interest rate in the current period and reserves in the first lag are significant determinants of capital flight in Nigeria. Also, the study revealed that capital flight negatively affects economic growth and investment in Nigeria. The study therefore recommends amongst others that external debt and foreign direct investment should be used for productive purposes such that capital flight as a result of inflow of funds from abroad is impossible and that stable exchange rate policies should be adopted to avoid devaluation which is a determinant of capital flight in Nigeria.