Tag Archives: Exchange Rate


This work applied Generalized Autoregressive Conditional Heteroskedasticity (GARCH) approach to modelling volatility in Rwanda Exchange rate returns. The Autoregressive (AR) model with GARCH errors was fitted to the daily exchange rate returns using Quasi-Maximum Likelihood Estimation (Q-MLE) method to get the current volatility. Asymptotic consistency and asymptotic normality of estimated parameters were given. Akaike Information criterion was used for appropriate GARCH model selection while Jarque Bera test used for normality testing revealed that both returns and residuals have fat tails behaviour. It was shown that the estimated model fits Rwanda exchange rate returns data well.

Keywords: Exchange Rate, GARCH model, Model, Quasi Maximum Likelihood, Volatility


Estimating the probability of rare and extreme events is a crucial issue in the risk estimation of exchange rate returns. Extreme Value Theory (EVT) is a well-developed theory in the field of probability that studies the distribution of extreme realizations of a given distribution function, or of a stochastic process, satisfying certain assumptions. This work has fitted the Generalized Pareto Distribution (GPD) to the excess returns assuming the residuals are independent and identically distributed. The results are used to estimate extreme Value at Risk (VaR) in Rwanda exchange rate process.

Keywords: Confidence intervals, EVT approach, Exchange Rate, Generalized Pareto Distribution, Maximum Likelihood Estimation, Value at Risk


Estimating the probability of rare and extreme events is a crucial issue in the risk estimation of exchange rate returns. Extreme Value Theory (EVT) is a well developed theory in the field of probability that studies the distribution of extreme realizations of a given distribution function, or of a stochastic process, satisfying certain assumptions.  This work has fitted the Generalized Pareto Distribution (GPD) proposed by EVT to the excesses returns over the threshold to estimate quantiles in the tails of independent and identically distributed residuals and asymptotic properties of the estimators were given. The results were applied to estimate extreme quantiles in the Rwanda exchange rate process.

Keywords: Confidence intervals, EVT approach, Exchange Rate, Generalized Pareto Distribution, Maximum Likelihood Estimation, Quantiles estimation


The very essence of this research was to assess the financial performances of banks in a liberalized banking environment using an ordinary Least Square (OLS) method of regression analysis to analyze five selected banks in Nigeria. The time series properties of the variables were investigated by conducting a unit root test to determine the stationarity status of the data using annual series data spanning from 2001 – 2010. The analysis was further extended to cointegration and error correction modeling (ECM) technique in order to test for the stationarity status of the data by conducting a unit root test using the Dickey–Fuller (DF) and Augmented Dickey–Fuller (ADF) test. The objective of this research among others is to find out the effect of the nominal lending rate, the exchange rate and the credit volume on banks financial performances in terms of their profitability. The data sources were mainly from a ten year financial summary of the banks selected and CBN Statistical Bulletin, various years. From the empirical evidence made from the study so far, it was discovered that the nominal lending rate and the total credit had a positive impact on the profit of the five selected banks under review. Only exchange rate has a negative significance which is contrary to the other variables studied. The overall submission was that the variables employed are statistically significant as over 98 percent of them were explained at the long run. The researcher, therefore, recommends that to improve banks financial performance, the banks need a good regulatory environment that will enable them to expand their scope of business but strictly within the financial service industry and also good corporate governance that will allow for transparency and minimize fraud in the bank.

Keywords: Exchange Rate, Financial Performance, Interest Rate, Liberalization, Total credit

Foreign Exchange Management and the Nigerian Economic Growth (1960 – 2012). (Review Completed - Accepted)

The study examined foreign exchange management and the Nigeria economic growth from 1970 to 2012. The scope of the study is limited to Nigeria. The empirical model for the study was based on the conclusion of our theoretical framework. The data used for this study were majorly sourced from the Central Bank of Nigeria Bulletin (2011). The ordinary least square estimation techniques within the error correction model (ECM) framework are employed in the study. The choice of the ECM is to enable it account for the explanatory potent of the regressions in both the short run and long run as well as ascertaining the dynamics of attaining long run equilibrium, an issue which is the key to studies related to macroeconomics variables one of which is the exchange rate. The Johansen-Joselius Co- Integration test is employed in this study, to test for the presence of a long run relationship between the dependent variable (exchange rate) and the independent variables. The result of the co-integration as revealed show that trace statistics and maximum Eigen values are greater than the critical values at 5% level of significance. It shows that there is a unique long run relationship among Y, EXCR, EXPT,IMP, INF and FDI. The result further shows that the explanatory variables explain and account for about 99% of variation in economics growth peroxide by GDP, which is an evidence of a good fit of the model. The f-statistics shows that the explanatory variables are jointly significant in explaining economic growth (dependent variable). The result above shows export and foreign direct investment are statistically significant in determining economic growth which considered at 5% and 10% respectively. However, exchange rate import and inflation are found to be statistically non-significant. It is against this back drop of the above findings, that it is recommended that effort be made to increase the consumption of made in Nigeria goods, which includes the usage of raw material that can be sourced locally by Nigerian industries in order to increase foreign exchange earnings. The implication of this is that local industries should be encouraged to look inward for their raw material. Having uncovered from the study that the nexus between economic growth and foreign exchange management being a short run relationship, it is necessary that the foreign exchange management policy initiatives be made to satisfy the shorts–run behavioral expectations of the variables used in uncovering this fact

Keywords: Error Correction Model, Exchange Rate, Foreign Exchange Market, economic growth

Effects of Exchange Rate Liberalization on French Beans Exports in Kenya (Review Completed - Accepted)

The exports of French beans are one of the leading contributors to foreign exchange earnings in Kenya. Nevertheless, the economic impacts of exchange rate liberalization on French beans exports in Kenya are unclear. The purpose of this paper is to evaluate the magnitude and direction of the effects of exchange rate liberalization on French beans exports from Kenya to its major trading partners in the European Union. Monthly data for a fixed exchange regime represented by the period from 1990- 1993 and a flexible regime represented by the period from 1994-2011 was used in the estimation of an export demand model. The empirical results show that the liberalization of the exchange rate led to an increase in the French beans export volumes from Kenya to the European Union. The paper recommends maintenance of a competitive exchange rate and export promotion in order to boost Kenya’s French beans exports.

Keywords: Exchange Rate, Exports, Liberalization, Time Series


The study aims at evaluating the link between inflationary rate and economic growth in Nigeria. It also examines the nature and form of association between inflationary rate and exchange rate as well as interest rates from 1979 t0 2010.Ordinary least squares approach in the form of multiple regression was adopted in examining the relationship among the variables while the causalities were evaluated using Granger Causality model. It is pertinent to check whether the short run relationships would be sustained in the long run. To achieve this, Johansen and Juselius cointegration technique was adopted while the variables were adjusted for stationarity using the Augmented Dickey- Fuller (ADF) tests for unit root. It was found that inflationary rate is negatively related with real gross domestic product while exchange rates and interest rates are positively related with inflationary rate though not to a very significant extent. This is sustainable even in the long run and the implication is that when inflationary rate is rising, it affects the economy negatively as growth is dampened. On causality, at both lag 2 and lag 4, the study reveals that there is no causality between inflationary rate and real gross domestic product. However, at lag 2, there is a unidirectional causality running from inflationary rate to interest rate and also a unidirectional causality running from interest rate to real gross domestic product. At lag 4, there is a unidirectional causality running from interest rate to inflationary rate and from interest rate to exchange rate and also a unidirectional causality running from exchange rate to real gross domestic product. Consequently, efforts should be geared towards keeping inflationary rate at a single digit level to enhance the growth and development of Nigeria economy and to ensure that macroeconomic activities are kept alive

Keywords: Cointegration, Exchange Rate, GDP, Granger, Inflation Rate, Interest Rate

Forecasting of Exchange Rate between Naira and US Dollar Using Time Domain Model (Published)

Most time series analysts have used different technical and fundamental approach in modeling and to forecast exchange rate in both develop and developing countries, whereas the forecast result varies base on the approach used or applied. In these view, a time domain model (fundamental approach) makes the use of Box Jenkins approach was applied to a developing country like Nigeria to forecast the naira/dollar exchange rate for the period January 1994 to December 2011 using ARIMA model. The result reveals that there is an upward trend and the 2nd difference of the series was stationary, meaning that the series was I (2). Base on the selection criteria AIC and BIC, the best model that explains the series was found to be ARIMA (1, 2, 1). The diagnosis on such model was confirmed, the error was white noise, presence of no serial correlation and a forecast for period of 12 months terms was made which indicates that the naira will continue to depreciate with these forecasted time period.

Keywords: AIC, Auto Regressive Integrated Moving Average, Autocorrelation Function, BIC, Exchange Rate, Partial Autocorrelation Function

Richard Cantillon’s Ideologies and its Implications for Economic Development in Nigeria (Published)

This paper examines and ascertains how the contributions of Richard Cantillon have been relevant to the development of the Nigerian economy. In doing this, the economic thoughts of Richard Cantillon were critically examined in order to see how these issues raised have been affecting the Nigerian economy. Political economy and descriptive approaches were used to x-ray the relevance of Richard Cantillon’s contributions to Nigeria’s development. His contributions among others include: the nature of wealth, social and economic organization of people, wages of labour, theory of values, population problems and the use of gold and silver, barter, prices, circulation of money, interest, foreign trade, foreign exchange and banking and credit. The findings of the study revealed that these contributions are of great relevance to economic development in generally, but have not specifically contributed to the development of Nigerian economy. This is seen in the areas of low per capita income, negative attitude to work, inevitable population problems, persistent increase in prices, high lending interest rate, unfavourable terms of trade, incessant and diversion of public funds into private business rather than the real economy, and without doubt Nigeria has no place in foreign trade. Based on the foregoing, it was concluded that all these ugly trends accounted for the reason why economic development is not at sight in Nigeria. Thus, it was recommended that the monetary authorities should initiate sound monetary policies. Also, these monetary policies should be complemented with effective fiscal policies in order to put the Nigerian economy back to path of economic growth and development.

Keywords: Economic Development, Exchange Rate, Fiscal Policies, Foreign Trade, Interest Rate, Monetary Policies, Money Supply, Wages of Labour