ABSTRACT
The study is a critical
Evaluation of the impact of Exchange rate variation on Aggregate Demand in Nigeria Nigeria Nigeria Nigeria Nigeria Nigeria
TABLE OF CONTENTS
Title Page = = = = = = = = = i
Approval Page = = = = = = = = ii
Dedication = = = = = = = = iii
Acknowledgement = = = = = = = iv
Abstract = = = = = = = = = v
Table of Content = = = = = = = vi
CHAPTER
ONE
Introduction = = = = = = = = 1
1.1 Background of the Study = = = = = 1
1.2 Statement of Problems = = = = = = 5
1.3 Objective of the Study = = = = = = 6
1.4 Statements of Hypothesis = = = = = 7
1.5 Scope and Limitations of the Study = = = 7
1.6 Significance of the Study = = = = = 8
CHAPTER
TWO: LITERATURE REVIEW
2.1 Review of Theoretical Literature = = = = 10
2.2 Exchange ate Determination Models = = = 11
2.2.1 Flexible Price Monetary Model = = = = 12
2.2.2 Sticky Price Monetary Model = = = = 13
2.2.3 Equilibrium Model and Liquidity Model = = 14
2.2.4 Portfolio Balance Model = = = = = 15
2.3 An Overview of Exchange Rate Regimes = = 16
2.3.1 The Gold Standard Regime = = = = = 17
2.3.2 Flexible Exchange Rate Regime = = = = 18
2.3.3 The Crawling Peg Regime = = = = = 19
2.3.4 The Managed Float Regime = = = = = 20
2.3.5 The European Monetary System = = = = 21
2.4 An Evaluation of Exchange Rate Regimes in Nigeria
2.4.1 The Pre – Sap ara = = = = = = 23
2.4.2 The Post –Sapara = = = = = = 24
2.5 Exchange Rate Determinants = = = = 26
2.5.1 Interest Rate = = = = = = = 28
2.5.2 Transaction Motive = = = = = = 29
2.5.3 Volume of International Transaction = = = 29
2.5.4 Political Instability = = = = = = 30
2.5.5 Policy Actions = = = = = = = 31
2.6 Review of Empirical Literature = = = = 32
2.6.1 Empirical Literature on the Study using
Foreign
Data set = = = = = = = = = = = = = = =
= = = = = = == = 32
2.6.2
Empirical Literature on the Study Using
Nigerian Data set = = = = = = == = = =
= = = = = = = = 34
CHAPTER THREE: METHODOLOGY
3.1
An Overview of the Model = = = = = = = = =
= = = = = = 49
3.2
Model Specification = = = = = = = = = == =
= = = = = = = 50
3.3
Unit Root Test = = = = = = = = = = = = = =
= = = = = = = = 52
3.4
Co Integration and Error Correction = = = =
= = = = = = = 53
3.5.1 Economic Criteria = = = = = = = = = = = = = =
= = = = = = 54
3.5.2 Statistical Criteria = = = = = = = = = = =
= = = = = = = = = 54
3.5.3 Economics = = = = = = = = = = = = = = = = = =
= = = = = = 54
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF RESULT
4.1
ADF Test for Stationary = = = == = = = = = = = = = ==
= 58
4.2
CO Integration Test = = = = = = = = = = = = = = = = = = = 60
4.3
Result from Modeling log of GDP by OLS = = = = = = = 62
4.4
Economic Interpretation = = = = = = = = = = = = = = = = =63
4.5
Statistical Criteria = = = = = =
= = = = = = = = = = = = = = 69
4.5.1
T. Value
= = = = = = = = = = = = = = = = =
= = = = = = = = 70
4.5.2
F-
Test = = = = = = = = = = = = = = = = = = = = = = = = = = 70
4.6
Evaluation based on econometric Criteria =
= = = = = = = 71
4.6.2
Test for Hetrosedasticity = = = = = = =
= = = = = = = = = =71
4.6.3
Test for Multicollinearity = = = = = = = = = = = = = = = = =73
4.6.4 Normality Test = = = = = = = = = = = = = = = = = == = = = 74
4.6.5 Test for Adequacy of the Model = = = = = = =
= = = = = = 75
4.7
Evaluation of the Hypothesis = = = = = = = = = = = = = = = =76
CHAPTER FIVE
5.1
Summary = = = = = = = = = = = = = = = = = = = = = = = = =
78
5.2
Conclusion = = = = = = = = = = = = = = =
= = = = = = = = = = 79
5.3
Policy Implications = = = = = = = = = = = =
= = = = = = = = = 81
Bibliography
= = = = = = = = = = = = = = = = = = = =
= = = = = = 85
CHAPTER ONE
INTROUDCTION
1.1
BACKGROUND
OF THE STUDY
All
over the world, policy makers have always been on the move to ensure that there
is sustainable growth rate in the economies of the world. As a result, a lot of economic factors have
been brought to the fore to examine and investigate how they could be relevant
in the achievement of their economic objectives.
In
Nigeria Nigeria
Since exchange influences the interaction of
household, business firms, private financial institutions and the central bank,
it implies that it could also affect aggregate demand in Nigeria
Exchange
rates are of two broad categories. They include:
1. The fixed exchange rate and
2. The flexible exchange rate
The fixed exchange rates are pegged
rates within narrow range of values by the central bank on trade of currencies
while the flexible exchange also called FLOATING
exchange rate is the rate that is determined by the forces of demand and
supply. Government has little direct
control on the foreign exchange market that is flexible in nature.
Variation of exchange rates over the
years are known to have ripple effects on some other macroeconomic variables
like aggregate demand. This fact
underscores the pertinence of exchange rate to the economic well being of
countries that open their doors to international trade (Kombe, 2004). Due to
the impact exchange rate regimes have on economies of the world, economists
consider it vital to verify how their countries exchange rate are determined
since different regimes of exchange rate show different economic effects
(Kujis, 1998).
Exchange rate determination varies
from country to country. Part exchange rate regimes in Nigeria Nigeria Nigeria
1.2
STATEMENT
OF PROBLEM
Economic
and political analysts have reached a consensus on what a good exchange rate is
as well as how it could both be operated and sustained. In most economic papers
and literature, the major issues have been the need for competitive exchange
rate stability and structural adjustments in the promotion of this
competitiveness. However, since exchange rate reveals competitiveness of
exports from domestic economies to the outside world, the economic implication
of its variations need to be ascertained so that good exchange rate policies
that will be realistic in consonance with aggregate demand could be formulated,
adopted and operated.
Therefore,
this study aims at providing answers to the questions stated below in order to
ensure that viability reigns in the market.
1)
Are exchange rate and aggregate demand variable stationary?
2)
Does exchange rate variations have affect any impact on aggregate demand?
3)
To what extent does exchange rate affect aggregate demand in Nigeria
1.3
OBJECTIVES
OF THE STUDY
The
specific objective of this economic study are:
1.
To ascertain the impact of exchange rate
variations on aggregate demand.
2.
To estimate if there exists any casual
relationship between exchange rate and aggregate demand.
1.4
STATEMENT
OF HYPOTHESIS
The
following null hypothesis are to be stated for the statistical significance and
non – significance of data.
Hi: Exchange
rate instability has no impact on aggregate demand in Nigeria
H2: There is no casual relationship between exchange rate and
aggregate demand in Nigeria
1.5 SCOPE
AND LIMITATIONS OF THE STUDY
The length of period within which this
study covered is thirty years. This
falls between the periods of 1976 and 2006.
This essence of this is to enable the observation for the research work
compensate for degree of freedom that could be cost.
1.6 SIGNIFICANCE
OF THE STUDY
Research work of this kind is usually
treated directly with the variables lifted from their sources. However, in this study, the directives of
Philips (1986), which states that they are statutory, will be adopted to be
assured that the result from this work is reliable for other policy works.
Thus, the findings of this study will
be of great importance to a lot of people.
Firstly, researchers carrying out research work on the influence of
exchange rate in 
