Appraisal of the Nexus among Currency Depreciation, Money Demand and Trade Balance in Nigeria (1986-2018)

  • Oluwole J. Adeyemi Chrisland University, Abeokuta, Nigeria
  • Isiaq O. Oseni Olabisi Onabanjo University, Ago-Iwoye, Nigeria.
  • S. A. Tella Olabisi Onabanjo University, Ago-Iwoye, Nigeria.

Abstract

The aim of this study is to appraise the current state of literature and assess the nexus among currency depreciation, money demand and trade balance in Nigeria from 1986 to 2018. Previous studies appeared to have concentrated on the effects of currency depreciation on macroeconomic policy, while its relationship with money demand and trade balance is scantly documented in the literature. This study therefore, explored this relationship between currency depreciation, money demand and trade balance by reviewing the literature and appraising the relationships. This paper is a review article and provides a survey of the alternative theories that focus on the effect of currency depreciation, money demand and trade balance. Nigeria secondary annual time series data from 1986 to 2017, obtained from Central Bank of Nigeria (CBN) Statistical Bulletin, 2017 was used for the study. The results of the descriptive statistics revealed that currency depreciation exhibited a procyclical trend occasioned by the policies adopted by different administrations in the management of foreign exchange and exchange rates. Trends in currency depreciation and trade balance exhibited structural breaks and occasional spikes revealing that trade balance responded positively to currency depreciation. The study concluded that depreciation of the naira against other foreign currencies and money demand enhances Nigerian trade balance. It thus recommended that, government should create policies towards improving exportation and enhance flow of credit to the real sector to stimulate economic growth.


Keywords: Currency Depreciation; Money Demand; Trade Balance; Economic growth; exportation

Published
2020-10-25
How to Cite
ADEYEMI, Oluwole J.; OSENI, Isiaq O.; TELLA, S. A.. Appraisal of the Nexus among Currency Depreciation, Money Demand and Trade Balance in Nigeria (1986-2018). KIU Journal of Humanities, [S.l.], v. 5, n. 3, p. 97-107, oct. 2020. ISSN 2522-2821. Available at: <https://ijhumas.com/ojs/index.php/kiuhums/article/view/1012>. Date accessed: 22 jan. 2022.