Abstract:
This study applied monthly time series data ranging from January 2008 to April 2017 to examine whether inflation leads to currency devaluation in Nigeria. An auto-regressive distributed lags (ARDL) procedure was used in the assessing the short and the long-run results while ordinary least square (OLS) fully modified OLS (FMOLS) and dynamic OLS (DOLS) are used for robustness checking. The result reveals that inflation is positively affecting exchange rate in Nigeria. Once inflation rises, the Nigerian currency (Naira) depreciated. Therefore, the central bank of Nigeria (CBN) should determine the specific threshold level of inflation target (inflation adverse) with a minimum influence on exchange rate |
