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External Reserve and the Nigerian Economy: The Dual Folded Debate

Osabuohien, E. S. C. and Egwakhe, A. J. (2008) External Reserve and the Nigerian Economy: The Dual Folded Debate. African Journal of Business and Economic Research, 3 (2 & 3). pp. 28-41.

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The external reserves‑economy relationship argument has generated debate due to unsatisfactory theoretical and empirical consensus. This paper provides an economic assessment and empirical insight to the debate in Nigeria. Towards this, the paper used secondary data from CBN statistical bulletin (1994 ‑ 2005). The outputs generated revealed that external reserves exceeding the three months benchmark equivalent was in excess: its holding cost was high. In addition, the results suggested dual fold interpretation of the analyses: 1) holding of external reserves do promote exchange rate stability, 2) positive relationship exists between external reserves and exports; however, the relationship was not significant, hence suggesting that export was not induced significantly by the nation’s external reserves. The paper suggests that domestic production efficiency is required not really external reserve accumulation to improve macroeconomic performance.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Law, Arts and Social Sciences > School of Social Sciences
Depositing User: Mr Adewole Adewumi
Date Deposited: 15 Jun 2011 15:09
Last Modified: 13 Dec 2011 21:13

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