Foreign Exchange Market and Economic Growth in an Emerging Petroleum Based Economy: Evidence from Nigeria

Abstract

This study is an exposition of foreign exchange market and economic growth in an emerging economy - the Nigerian case. The paper focuses on the implications of exchange rate movement on economic growth. The ordinary least square (OL5) technique was adopted using time series data on exchange rate movement, volatility of exchange rate (EXCHR) labor force, gross domestic investment and technology, volatility of exchange rate is measured by three years moving average of standard deviation of real exchange rate. The paper maintains that in view of the positive relationship between exchange rate, volatility and economic growth in Nigeria, exchange rate policy should be designed to bridge the savings investment gap so as to enhance government revenue as well as reduce the fiscal Lacuna through the curtailing of deficit geared at increased and sustained economic growth. Gross domestic investment should also be sustained since this leads to significant economic development.