Effects of Real Exchange Rate and Total Debt Stock on General Price Level in Nigeria
Abu Maji, Iortyer A. Dominic
Keywords: Exchange rate, debt profile, IMF, price, monetary, econometrics
Abstract
Over the years, exchange rate and debt profile have been critical challenges to the Nigerian economy. In attempts to address these challenges, successive Nigerian governments have formulated and implemented unsuccessful policies to tackle these challenges. Regrettably, Nigeria has consecutively witnessed exchange rate depreciation which results to increase in general price level. Immediate reactions by governments and monetary authorities’ have always been the pegging of the real exchange rate with the aim of inducing economic growth and development; thereby reducing general price levels. Employing an econometric model of Error Correction Mechanism (ECM), this study examines the effects of real exchange rate and debt stock on general price in Nigeria. Findings were consistent with apriori expectation as the regressors (real exchange rate debt stock and imports) have positive effects on general price level and a fast speed of adjustment to equilibrium restoration. The study thus concludes that real exchange rate, debt stock and imports can trigger increase in general price level. Consequently, the study recommends deliberate exchange rate measures as well as debt control measures for enhanced stability in the general price level in Nigeria.
Author Biography
Abu Maji
Department of Economics,
Federal University Wukari, Taraba State, Nigeria
Iortyer A. Dominic
Department of Economics,
Federal University Lokoja, Kogi State, Nigeria