What are the effects of the exchange rate on UK businesses? The exchange rate will play an important role for firms who export goods and import raw materials.
The subject of exchange rate fluctuation came to be a topical issue in Nigeria because it is the goal of every economy to have a stable rate of exchange with its trading partners. In Nigeria, this goal was not realized in spite of the fact that they embarked on the devaluation of the naira and adopted the Structural Adjustment Program SAP in The failure to realize this goal subjected Export import performance and exchange rate Nigerian manufacturing sector to the challenge of a constantly fluctuating exchange rate.
Export Performance One objective of the SAP was the restructuring of the production base of the economy with a positive bias for the production of agricultural export.
The foreign exchange reforms that facilitated a cumulative depreciation of the effective exchange rate were expected to increase the domestic prices of agricultural exports and hence boost domestic production. The depreciation increased the prices of agricultural exports and the result indicated a worked increase in the volume of agricultural exports over the years.
However, very little achievements were made in stabilizing the rate exchange. As a consequence, the problem of exchange rate fluctuations in Nigeria persists up till date.
Export Performance Fluctuation is a major constraint on development of an economy, making planning more problematic and investment more risky.
For instance, fluctuation in exchange rate may reduce the activities of potential investors in Nigeria because it increases uncertainty over the returns of a given investment. Potential investors will invest in a foreign location only if the expected returns are high enough to cover for the currency risk Gerado, Risk in international commodity trade usually arises from two main sources; changes in world prices or fluctuation in exchange rate.
Therefore, understanding the behavior of the exchange rate is very important for many reasons. This suggests an erratic change in its value having a long-run effect on export and economic growth.
The two major trends in the literature review indicate thus; the first argues that exchange rate fluctuations represent uncertainty and will impose costs on risk- adverse economic agents which as a result respond by favoring domestic- foreign trade just at the margin.
In other words, it might hamper the growth of international trade Chowdhury,Cushiman,Kenen and Rodrik, The second strand of literature argues that if the economic agents are sufficiently risk lovers, an increase in exchange rate raises the expected marginal utility of export revenue and thus induces them to increase their exports in order to maximize their revenue.
Therefore, exchange rate fluctuations may actually catalyze trade flows De Grauwe: Export PerformanceIMF: Only few attempts have been made to examine them for developing countries, Nigeria inclusive because of the lack of reliable time —series data.
Export Performance The research will differ from the existing ones as it will carefully examine exchange rate fluctuations and export for both the oil sector and non-oil sectors.
Previous studies assessed only the influence of exchange rate fluctuation on either oil export, neglecting the non-oil export or on non-oil export alone excluding the oil export.
They failed to ascertain its effect on both the oil and non-oil like agricultural and manufacturing sectors export. Analyzing only oil exports or non-oil exports exclusively may not really give a value judgment and conclusion on the effect of exchange rate fluctuations and export performances in Nigeria.
Furthermore, the study will provide deep insight into the relationship existing between exchange rate fluctuations and exports by adopting a popular econometric methodology for a measure of fluctuations which is Generalized Autoregressive Conditional Heteroscedasticity GARCH modeling technique, which was not used by some of the previous studies.
Export Performance In view of the above problem, the following research questions are raised: How does oil export respond to exchange rate fluctuation?
How does manufacturing export respond to exchange rate fluctuation? Specifically, the study addresses the following objectives: To trace how oil export respond to exchange rate fluctuation.
To trace how manufacturing export respond to exchange rate fluctuations. To trace how agricultural export respond to exchange rate fluctuation. Also, the research will be of immense help to the general economy, as it will provide possible measures the monetary authority could adopt in order to maintain exchange rate stability so that exchange rate can influence importantly export growth, consumption, resource allocation, employment and private and foreign investments as research has shown.
Above all, it will add to the existing literature thus, providing relevant information that could guide further researchers on this subject.
Thus, it is restricted to tracing the responses of some export components to shock to the exchange rate over some periods; hence it omitted the test of hypothesis.
The study covers a period of 51 years that is This range is chosen to give room for enough degree of freedom that will ensure reliable estimates.ABSTRACT. This paper “exchange rate fluctuation and export performances in Nigeria” aim to determine the effect of foreign exchange dynamism on the country’s export performance .
Correct citation: Wondemu, Kifle and Potts, David, (), The Impact of the real exchange rate changes /on export performance in Tanzania and Ethiopia, Working Paper Series N° , African Development Bank, Abidjan, Côte d’Ivoire.
Find out how the balance of trade affects a country's exchange rates and how those exchange rates can, in turn, affect the balance of trade. More recently, a decline in the effect of real exchange rates on export performance has been documented.
This has been linked with the emergence of GVCs through three mechanisms: Firms need to import to be able to export, therefore their exports . Jan 11, · Impact of a change in the Rand/dollar exchange rate on imports and exports.
The balance of trade influences currency exchange rates through its effect on the supply and demand for foreign exchange. When a country's trade account does not net to zero – that is, when exports are not equal to imports – there is relatively more supply or demand for a country's currency, which influences the price of that currency on the world market.