IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF SOCIAL SCIENCES AND MANAGEMENT RESEARCH (IJSSMR )

E-ISSN 2545-5303
P-ISSN 2695-2203
VOL. 3 NO. 4 2017

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Testing for Structural Breaks in the Nigerian Exchange Rate using Univariate time Series Analysis

John Okey Onoh (Ph.D), Mbanasor, Christian Okechukwu (Ph.D) and Duruechi Anthony .H

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Abstract

The research was conducted on time series data with the objective of trying to find out if there are structural breaks in the Ordinary Exchange Rate (OER) in Nigeria. But more specifically, the researchers applied various methods in testing the structural breaks such as the F Statistic in comparing statistical models fitted to the data set to find out if the model fits the population. The robustness of this test was further validated with Quant Andrew and Bai Perron test. And unit root tests were employed to test the stationarity of values using Bartlett kernel and Kwiatkowski- Phillips-Schmidt-Shin. With evidence of stationarity an equation was introduced to capture seasonality given that the data is times series. Further correlogram tests was used to test if the error term is stationary and the results indicate that the level of Autocorrelation and the Partial Autocorrelation were very insignificance. A major finding was that in using the ARIMA model it was evident that AR is stationary and MA is invertible. However, the MA has roots close to 1, implying that there may be evidence of over differencing of the series. In conclusion, the identified break dates of 1992Q2, 1995Q3 and 2005Q3 coincides with a period of persistent excess liquidity exacerbated by the monetization of excess crude receipts and the distribution of enhanced statutory allocation to the three tiers of government. The effect of the identified structural break was accommodated in our modeling approach to ensure that the estimated parameters are unbiased. The preliminary analysis shows that the exchange rate was more robust than other rates in explaining developments in the foreign exchange market. Policy recommendations include that policy makers give feasible proposals on diversification away from oil. Other measures include a review on regulatory, fiscal and monetary policy to reduce the impact of inflation and to increase global competitiveness of exports so as to attain the adequate level of e

keywords:

Structural breaks, Nigerian exchange rate, multivariate, time series

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