Department of Business Administration

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Browsing Department of Business Administration by Subject "ARCH"

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    IMPACT ANALYSIS OF EXCHANGE RATE VOLATILITY ON SMES PRODUCTIVITY IN NIGERIA: THE ARCH-GARCH APPROACH
    (Department of Business Administration, Nasarawa State University Keffi, 2018-03-19) Adigizey, John Dollay; John, B.A.; Wumi, Veronica Adigizey
    In Nigeria, effort had always been exerted toward maintaining stable exchange rate regime that would spur the economy into the global market system, with the hope to enhancing competiveness of domestic industries, adopting appropriate technology, etc. Nevertheless, the domestic currency continued to fluctuate and depreciate against the dollar throughout the 1980’s to date, putting the SMEs in desperate search for foreign exchange to ameliorate their import dilemma. The paper thus examined the effect of exchange rate volatility on SMEs productivity in Nigeria between 1986 and 2017. We used ARCH-GARCH approach to generate time varying conditional variance of exchange rate as a standard measure of exchange rate volatility. Results showed no strong direct relationship between changes in exchange rate and output growth—and no significant influence of exchange rate policy on SMEs productivity due to long-term effect of real devaluation. Furthermore, the zero-directional causality that neither moved from exchange rate volatility to SMEs productivity nor vice versa further confirmed that exchange rate volatility did not exert positive influence on the SMEs productivity. Thus, there is need to improve on the existing exchange rate management framework, as this can influence the rate of income growth, but only in the context of a broad based economic reform involving a complementary monetary policy. There’s need to encourage economic diversification by shifting emphasis to the private sector, like the SMEs, to produce domestic competitive substitutes for imported goods.