Citation:

Ashogbon, Festus Olatunbode, Onakoya, Adegbemi B., Omokehinde, Joshua Odutola. "Public Debt, Institutional Quality and Exchange Rate Volatility: Evidence from Nigeria" International Research Journal of Economics and Management Studies, Vol. 2, No. 2, pp. 1-9, 2023.

Abstract:

In Nigeria from 1981 to 2020, the study investigates the connection between institutional strength and currency rate volatility. The Central Bank of Nigeria statistical bulletin, the Debt Management Office, the Global Development Indicators, and the Worldwide Governance Indicators were used to compile secondary time series data on the domestic and external debt, exchange rate, fiscal balance, institutional quality, and interest rate on an annual basis. The study employed an autoregressive distributed lag model with the exchange rate as the dependent variable and other variables as the explanatory variables to investigate both long- and short-term correlations. There was evidence of long-term connections in the error correction term, which turned out to be negative and statistically significant at one percent. Also, a considerable positive relationship between institutional quality and exchange rate and a long-term large negative association between external public debt and exchange rate are established. While domestic debt has a positive and significant relationship with the exchange rate, institutional quality is revealed to have a negative and significant association with the exchange rate in the near term. The report therefore advises that in order to minimise dependence on external debt in particular and to secure the entrenchment of strong, virile, and autonomous institutional quality, the government should devise other means of financing operations.

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Keywords:

Autoregressive distributed lag, Exchange rate, External and domestic debt, Institutional quality.