Obaji, Samuel Itumo , & Nweke, Joseph N .
Department of Economics, Ebonyi State College of Education Ikwo.
Abstract.
This research work investigated the impact of trade openness and exchange rate variation
on economic diversification in Nigerian economy from 1986-2020 using secondary data
obtained from Central Bank of Nigeria statistical bulletin. In attempt to carry out
effective research on the topic, trade openness, exchange rate and a control variable
private domestic savings was regressed on non-oil export which was used as a proxy for
economic diversification.. Autoregressive distributed lag model (ARDL) was used as the
variables have different order of integration. The ARDL Bound test result indicated the
presence of long-run relationship among the variables. The result of the short-run form
revealed that trade openness has positive and significant impact on economic
diversification while exchange rate variation has negative and significant effect on
economic diversification. In the long-run trade openness has positive and insignificant
effect on diversification while exchange rate has negative and insignificant effect on
diversification. The result implies that raising the degree of trade openness by 1% will
lead to 0.83% increase in economic diversification in the short-run and 0.82% increase in
the long-run while a 1% increase in exchange rate will lead to 0.38 decrease in economic
diversification in the short and 0.19 decrease in the long-run.. Based on the result the
researcher recommends extensive implementation of trade openness policies so that the
nation could benefit more from trading. Also the work from its findings recommends for
policies that could stabilize the exchange rate.
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