Effect of Global Financial Reform (GFR) on Nigeria's Exchange Rate Volatility (1989-2019)

Abstract

The study examined the effect of global financial reform on Nigeria exchange rate volatility in Nigeria right from 1989 to 2019. The study reviewed major reformation in global financial system in line with the global financial crisis over time system. There has been an empirical neglect in this line of the study as it specifically examines the effect of minimum lending rate and the influence of money supply on Nigeria Exchange Rate Volatility. Time series analysis was conducted along with post estimation techniques to captured specified variables specified in the econometrics models, while third model captured the rate of volatility through ARCH and GARCH effect at 0.05 level of significance. Findings shows that exchange rates are extremely volatile in the short run because they are very responsive to monetary policy The result above shows the coefficient to be positive and statistically significant at all levels (0.00<0.05). It can be seen that the past value of the real exchange rate(REXR) has a very strong predictive ability on the current rate of exchange. This study concludes minimum lending rate (MLR) has no significant impact on exchange rate, but money supply (MS) significantly influences the rate of volatility in exchange rate that the high predictive ability in the variables for global financial reforms has positive and significant effect on exchange rate volatility for the specified period of time

Keywords: Money Supply,Minimum Lending Rate,Real Exchange Rate,  Volatility, Global Financial Reform and Monetary Policy