The Impact of Exchange Rate Fluctuation on the Economic Growth of Somalia (original) (raw)
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The exchange rate is very important, because it allows for the conversion of national currency into another, thus it can facilitate international trade for goods and services and the transfer of funds between countries and it also allows comparison of prices of goods at the same in different countries. In general, the price difference between similar goods determines the goods traded and where they were sent. However, the currency could stir volatility it depends on the economic situation in the foreign exchange market in particular. The purpose of this study is to investigate the effects of the selected macroeconomic variables on exchange rates in Somalia. This paper was used Ordinary Least Squares (OLS) to make econometrics test. And consider using Arbitrage Pricing Theory. This paper found that trade Balance has a significant negative relationship to exchange rate in Somalia while inflation and GDP per capita have a positive relationship to exchange rate. Exchange rates also may be affected by some other factors that have not been considered in this study, so that this study recommends that central bank of Somalia should enact policies that improve the political factor it contributes towards gaining value of the Somalia shilling.
DETERMINANTS OF EXCHANGE RATES IN SOMALIA
Asian Journal of Economic Modelling, 2017
The purpose of this paper is to investigate the factors that determine exchange rates in Somalia and how those factors influence the exchange rates. To examine the relationship, a Monetary Approach to Exchange rate is employed to estimate the effects of trade balance, money supply, external debt and lack of government on the exchange rate in Somalia for the period from 1970 to 2014 using MRA under OLS method. Main findings indicate that trade balance, money supply and external debt has a negative significant relationship to exchange rate in Somalia while lack of Government has a positive relationship to exchange rate. Also, this study examined some variables. Exchange rates also may be affected by some other factors that have not been considered in this study, so that this study recommends that the central bank of Somalia should enact policies that improve the political factors it contributes towards gaining the value of the Somalia shilling.
Factors determine exchange rate volatility of somalia
The purpose of this paper was to investigate what factors determines the exchange rate of Somalia. Quantitative research methodology has been employed to develop regression model using time series data of 12 years. The regression model has been developed based on Quantity theory of money, purchasing power parity and uncovered interest rate parity theory. Somalia is on the countries where highest exchange rate volatility exists; for example in 2012 the rate jumped 29% percent and two weak later dropped 21%, when Turkish humanitarian aid agencies injected the market a lot of U.S dollar. Based on my study using regression model for time series data of 12 years, the four factors are mainly attributable for the exchange rate volatility of Somalia; these factors include balance of payment, inflation rate, money supply (mostly come from remittance and NGOs) and Bank profits.
AN EMPIRICAL ANALYSIS OF THE RELATIONSHIP BETWEEN EXCHANGE RATE FLUCTUATIONS AND ECONOMIC GROWTH
A PROJECT SUBMITTED TO THE SCHOOL OF POSTGRADUATE STUDIES, UNIVERSITY OF LAGOS, IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION (MBA), 2024
This study, titled "An Empirical Analysis of the Relationship between Exchange Rate Fluctuations and Economic Growth in Nigeria (1994 – 2023)," investigates how exchange rate volatility impacts Nigeria's economic performance. Despite various policy measures, Nigeria's currency remains volatile, posing challenges for economic planning and development. The study aims to analyze the effects of exchange rate fluctuations on Real GDP, examining trends, patterns, and policy effectiveness. Using a multivariate regression model with data from the Central Bank of Nigeria, the World Bank, the IMF, and the National Bureau of Statistics, the research incorporates key economic theories such as Purchasing Power Parity, Keynesian economics, Monetarist theory, and the Balance of Payments theory. Results show a significant negative relationship between exchange rate fluctuations and Real GDP growth, with a coefficient of -30.680. Despite this, the study identifies a positive time trend in Real GDP growth, suggesting underlying factors contributing to economic stability. Hypothesis testing confirms that exchange rate fluctuations significantly affect Real GDP, leading to the rejection of the null hypothesis. The findings highlight Nigeria's economic resilience and the need for stabilizing the exchange rate. Recommendations include implementing policies to stabilize the exchange rate, promoting economic diversification, enhancing monetary policy frameworks, investing in infrastructure and human capital, and maintaining fiscal discipline to support sustained economic growth. Keywords: Exchange Rate Fluctuations, Economic Growth, Real GDP, Nigeria
The Impact of Inflation on Economic Growth Case Study of Somalia
CERN European Organization for Nuclear Research - Zenodo, 2022
This study investigates the impact of inflation on the economic growth of Somalia over the period 1991 to 2015. Typically, this relationship has been analyzed using simple correlations and deterministic models. In this analysis, a tri-variate model is used, incorporating the unemployment rate into the framework for analysis, we capture the policy trade-off between managing inflation at a low rate and targeting low unemployment as described by the Phillip curve hypothesis. After checking the series for unit root by using the Augmented Dickey-Fuller (ADF) and Phillip-Perron (PP) tests, we identified that all the variables are stationary at the first difference, that is I~(1). Furthermore, Engle-Granger Cointegration test was employed to check if there is a long-run equilibrium between the variables, results from this test showed that the variables were Co-integrated, which means a long-run equilibrium exists between the variables. The study explores the existence of a negative relationship between inflation and economic growth in Somalia. In addition, we estimate the vector error correction model and the result indicates there is convergence among the variables in the long run. The speed of adjustment or the value of the coefficient for error correction term was just under fifty percent which indicates almost 50% of the deviation of the inflation from its short-run equilibrium level is corrected each year.
The research investigated the effect of exchange rate, lending interest rate, and inflation on the economic growth of Ethiopia, using data from 1982 to 2021. The independent variables included exchange rate, lending interest rate, inflation rate, government expenditure, gross capital formation, and foreign direct investment, with economic growth functioning as the dependent variable. Integration levels in the time series were determined through the Philips-Perron (PP) and Augmented Dickey-Fuller (ADF) unit root tests. The Autoregressive Distributed Lag (ARDL) and its Error Correction Model (ECM) were applied to discern long run and short-run relationships. The study identified both long run and short-run relationships within the assessed model. It revealed that over time, the exchange rate has a considerably positive influence on economic growth. In contrast, to initial years in the short run, the exchange rate exhibits a negative and significant effect at both lag 1 and lag 2. Regarding inflation, its effect on economic growth is not significant in the long run. However, in the short run, it has a significant and negative effect, particularly with a one-period time delay (lag1). Lastly, lending interest rates have a negative and significant effect on economic growth in both the short and long run. In addition, the research investigated whether there is a statistically significant threshold level of inflation that influences growth in Ethiopia differently, based on whether it falls below or above this level. The study used time series data from 1982 to 2021 and the Ordinary Least Squares (OLS) technique to analyze this. The findings confirmed a maximum threshold of 7 percent for a positive relationship between the two variables. However, when inflation rates exceed 7 percent, the relationship turns negative. The research findings indicate that for promoting economic growth in Ethiopia, it is essential for the Ministry of Finance (MOF) and National Bank of Ethiopia (NBE) the to adopt policy suggestions such as ensuring a stable exchange rate, controlling lending interest rates, and targeting inflation rates below 7%. It is advised that monetary and fiscal policy creators pay attention to the insights offered, which would assist them in formulating efficient strategies to manage these microeconomic indicators effectively, ultimately contributing to the country's economic growth. By adopting a coordinated strategy that integrates these policies, Ethiopia can attain sustainable growth. To ensure the effectiveness of these measures, continual evaluation and adjustments are essential.
The Impact of Exchange Rate Fluctuation on the Nigerian Economic Growth: An Empirical Investigation
This research study examined the impact of exchange rate on economic growth from 1986 to 2013. The main type of data used in this study is secondary; sourced from Central Bank of Nigeria Statistical Bulletin of various issues. From 1986 being the year the monetary authority shifted from fixed exchange rate regime to flexible exchange rate regime to 2013. The correlation and regression analysis of the ordinary least square (OLS) were used to analyze the data. The result revealed that exchange rate has positive impact but not significant with (β =0.014, t = 1.783, Pns) this is affirms previous studies that developing countries are relatively better off in the choice of flexible exchange rate regimes. The result also indicated that interest rate and rate of inflation have negative impact on economic growth but not significant with (β =-0.002, t =-0.015, Pns) and (β =-0.023, t =-0.716, Pns) respectively. Therefore, the paper recommended that government should encourage the export promotion strategies in order to maintain a surplus balance of trade and also conducive environment, adequate security, effective fiscal and monetary, as well as infrastructural facilities should be provided so that foreign investors will be attracted to invest in Nigeria
Impact of Exchange Rate Fluctuations on Economic Growth in Nigeria (1987-2020)
Journal of Economics and Sustainable Development
This study is to examine the impact of exchange rate fluctuations on economic growth in Nigeria. The independent variables used for this study are money supply, interest rate, inflation rate and real exchange rate. The data used for this study is obtained from CBN statistical bulletin, 2019. The study used cointegration and Error correction mechanism to estimate the long run and short run relationship between the dependent variable and independent variables. The cointegartion result shows that there is a long run relationship between the dependent and the independent variables. The ECM results of the estimate shows that real exchange rate have positive and significant impact on Real GDP at 5% level of significance. The study therefore recommend that the CBN should track and effectively monitor all operators in the foreign exchange market, especially parallel market operators and other speculators so as to stabilize the Naira exchange rate and achieve steady economic growth.
Impact of Exchange Rate Fluctuation on Economic Growth in Nigeria
Asian Journal of Economics and Finance., 2013
This study examines the impact of exchange rate fluctuations on economic growth in Nigeria. The main type of data used in this study is secondary; sourced from Central Bank of Nigeria Statistical Bulletin of various issues. From 1986 being the year the monetary authority shifted from fixed exchange rate regime to flexible exchange rate regime to 2019. The correlation and regression analysis of the ordinary least square (OLS) were used to analyze the data. The result revealed that exchange rate has positive effect but not significant with (â=0.014, t = 1.783, Pns) this affirms previous studies that developing countries are relatively better off in the choice of flexible exchange rate regimes. The result also indicated that interest rate and rate of inflation have negative effect on economic growth but not significant with (â = 0.002, t = 0.015, Pns) and (â = 0.023, t = 0.716, Pns) respectively. Therefore, the study recommended that government should encourage export promotion strategies in order to maintain a surplus balance of trade. In addition, government should provide a conducive environment for trade, adequate security, effective fiscal and monetary, as well as infrastructural facilities that would attract foreign investments in Nigeria.