EXTERNAL RESERVES: CAUSALITY EFFECT OF MACRO ECONOMIC VARIABLES IN NIGERIA: 1980-2009

Abstract

The paper employed econometric tools to analyze time series data sourced from CBN Statistical Bulletin (1980-2009). VAR and Wald tests point out that past value of GDP is significant in explaining the current values of foreign reserves with the causality effect. The model revealed that the EXTR was statistically significant in the current year (-1) but statistically insignificance in the previous
years while among the macroeconomic variables only INFR was significant to EXTR. The study upheld that accumulation of foreign reserves does not produce satisfactory returns for Nigeria but effort should be made to create job and enabling environment for openness in trade that in turn increase the GDP of the Nigerian economy.