<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The study examines the asymmetric impact of exchange rate on the trade balance in Nigeria relying of time series data that spans 1960-2016. The Non-linear ARDL bounds test and the Bayer and Hanck (2013) test established a cointegrating relationship among the variables after accounting for structural break in the series. The Block Exogeneity Wald Tests affirmed the bidirectional causality between the variables. Findings establish the asymmetric impact of exchange rate on the trade balance in Nigeria, but unable to confirm the existence of the J-curve Phenomenon. This reveals that the devaluation of the Naira may not be a viable decision if the intention is to curb the persistent deficit in the country’s trade balance. Policies that could help curtail these deficits and enhance sustainable growth were suggested.</p></abstract>

The study examines the asymmetric impact of exchange rate on the trade balance in Nigeria relying of time series data that spans 1960-2016. The Non-linear ARDL bounds test and the Bayer and Hanck (2013) test established a cointegrating relationship among the variables after accounting for structural break in the series. The Block Exogeneity Wald Tests affirmed the bidirectional causality between the variables. Findings establish the asymmetric impact of exchange rate on the trade balance in Nigeria, but unable to confirm the existence of the J-curve Phenomenon. This reveals that the devaluation of the Naira may not be a viable decision if the intention is to curb the persistent deficit in the country’s trade balance. Policies that could help curtail these deficits and enhance sustainable growth were suggested.

Does Exchange Rate Have Asymmetric Impact on Trade Balance? Fresh Insights from Combined Cointegration

Studies in Business and Economics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The study examines the asymmetric impact of exchange rate on the trade balance in Nigeria relying of time series data that spans 1960-2016. The Non-linear ARDL...

Does Exchange Rate Have Asymmetric Impact on Trade Balance? Fresh Insights from Combined Cointegration

Published Online: May 20, 2020

Page range: 259 - 269

DOI: https://doi.org/10.2478/sbe-2020-0019

Keywords
Trade balance, Nonlinear ARDL, Exchange rate, Nigeria

© 2020 Solomon Prince Nathaniel, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Does Exchange Rate Have Asymmetric Impact on Trade Balance? Fresh Insights from Combined Cointegration

Published Online: May 20, 2020

Page range: 259 - 269

DOI: https://doi.org/10.2478/sbe-2020-0019

KeywordsTrade balance, Nonlinear ARDL, Exchange rate, Nigeria

© 2020 Solomon Prince Nathaniel, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
Trade balance, Nonlinear ARDL, Exchange rate, Nigeria