Abstract
This study investigated the impact of exchange rate volatility on trade flow in Nigeria. Applying the AR(2)-EGARCH(1, 1) and LA-VAR(3) models on quarterly data for the period of 1986 – 2012, the study revealed that there is no instantaneous relationship between trade flows and exchange rate volatility in Nigeria but that exchange rate volatility explained more of the variability in trade flow and vise versa. Therefore it was recommended that policy measures be put in place to ensure exchange rate stability in Nigeria. Output expansion and export promotion should be given their pride of place.
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