Cash Crop Output and Foreign Currency Exchange Rate in Nigeria: A Vector Error Correction Model Analysis

Abstract

This study examined the relationship among cash crop exportation, real exchange rate, nominal exchange rate, and exchange volatility. This study focuses on the effects of the exchange rate on cash crop exportation in Nigeria. This study covers a four-decade period between, 1980 and 2020. The study used a pairwise granger, Distributive Lag (ARDL) bounds testing approach to co-integrate the long-run relationship among the variables. The outcome of the study shows that there is unidirectional causality between cash crop production and nominal exchange in the long run. The result also reveals that there is unidirectional causality between exchange rate volatility in the long run. The result further shows that there is a bidirectional causality between exchange rate volatility and the real exchange rate. This study recommended that the government should participate actively in the money market in order to effectively guard the volatility of the market which will go a long way to enhance economic stability.