Currency devaluation on the Exportation Revenue: A study of Nigeria, South Africa and China (2000-2017) (Published)
The study examines the impact of currency devaluation on total export revenue in Nigeria, South Africa and China. Secondary data were sourced from World Bank Data Atlas for inflation rate (INFR), exchange rate (EXR), money supply (MS) and total export revenue (TER) for the period of 2000 to 2017 and were subjected to Augmented Dickey Fuller and Philip Perron Unit Root test, Johansen Co-integration and Vector Error Correction Model. The study discovers that EXR, INFR and MS were unable to impact exportation revenue in Nigeria and South Africa while showing strong impact on exportation revenue of China. The result also shows that only China enjoys long run relationship while Nigeria and South Africa currency devaluation variables showed absence of long run relationship with exportation revenue. Thus, the study concludes that currency devaluation in China impact negatively on the export position of Nigeria and South African economies. Hence, the study recommends maintenance of China’s currency devaluation position while Nigeria and South Africa should re-evaluate and re-adjust their currency devaluation procedures to improve exportation revenue.
EXCHANGE RATE AND TRADE BALANCE IN GHANA- TESTING THE VALIDITY OF THE MARSHALL LERNER CONDITION (Published)
Currency depreciation has been lauded as a means of improving a country’s trade balance borrowing from the Marshall Lerner Condition that the sum of the elasticity or the coefficient of the trade balance in respect of the exchange rate be greater or equal to unity. This paper examined exchange rate and trade balance in Ghana testing the validity of the Marshall Lerner Condition at aggregate level. The data spanned from 1980-2013 sourced from World Development Indicators. Co integration and vector error correction mechanism (VECM) was used to estimate the short as well as the long run parameters. The result of the findings showed that real effective exchange is negatively linked to trade balance in long run. In the short run the lag one coefficient shows a positive sign implying that trade balance deteriorate in the short run due to some contractual obligations already signed by the domestic country with the trading partners. However in the long run the coefficient shows that a depreciation of cedi all things being equal will lead to an improvement in Ghana’s trade balance. Though the Marshall Lerner condition is not met in Ghana because of the REER coefficient less than unity but evidence from the result indicates that depreciation can be used to improve on the trade balance. The estimated coefficient of the error correction term is -0.3696 which implies that the speed of adjustment is approximately 37. percent per quarter. This negative and significant coefficient is an indication that co integrating relationship exists among the variables. The paper recommends that Ghana should devalue its currency to move from the deficit side of the J curve to the surplus side since evidence from the result shows that depreciation or devaluation can substantially improves the trade balance in the long run.