Exchange Rate Volatility and Economic Growth: An ARDL Bound Test Approach

This study examined the impact of exchange rate volatility economic growth in Nigeria. The study looked at the volatility movement of the exchange rate and how it constitutes a headwind to the economic activity in the country and the eventual impact on productivity and economic growth. The study used ex-post facto research design where the researcher does not have control over the variables under review. The data span a period of 1986 to 2023 owing to data availability. The data used exhibited seemingly a mixed order of integration among the variables, the Johansen and Bound cointegration test were used to establish the long run relationship between the variables. Arising from the cointegration tests, the analysis which prompted the researcher to adopt the ARDL bound tests approach. The study found that exchange rate volatility impacts economic growth negatively and also that impact of foreign direct investment is not felt in the sectors that needed them most likewise external reserve in Nigeria. This study recommends that the government needs to facilitate uniform and appropriate pricing of foreign exchange rates, ensure efficient management of foreign exchange access, enhance domestic productivity to boost the foreign exchange availability, provide clarity and ensure transparency in market operations, and develop an efficient capital mobility framework.