Trade Openness and Exchange Rate Fluctuations Nexus in Nigeria

This study investigates the trade openness and exchange rate fluctuations Nexus in Nigeria using time series data covering from 1984 to 2013. The rational for this study is the realization that a viable exchange rate regime that is stable and predictable presents rich vista for economic growth and development through liberalization of trade. The study employed the Ordinary Least Square (OLS) method after a battery of preliminary investigations which include the Augmented Dickey-Fuller (ADF) test for stationarity, and pairwise correlation matrix technique. Our findings include among others that; trade openness impact positively about 59% magnitude on the exchange rate fluctuations or volatility in Nigeria. The causality test conducted using Granger causality procedure shows that there exist unidirectional causality between trade openness and exchange rate fluctuations without a feedback response.