International records / OpenAlex research

Exchange Rate Volatility, Currency Substitution and Monetary Policy in Nigeria

This article analyses the implications of currency substitution and exchange rate volatility for monetary policy in Nigeria. It adopts the unrestricted portfolio balance model of currency substitution, incorporating exchange rate volatility within the framework of the Vector Error Correction (VEC) technique. Results from both impulse response and the forecast error variance decomposition functions suggest that exchange rate volatility and currency substitution responds to monetary policy with some lags, meaning that monetary policy may be effective in dampening exchange rate volatility and cur…