Exchange Rate and Trade in Services Nexus in Nigeria: A Non-Linear ARDL Approach

A nonlinear ARDL model is employed to investigate the asymmetric drivers of non-oil trade in services between Nigeria and Netherlands. A significant number of past studies have concentrated their attention on the elasticity of trade in services to real exchange rates and income as well as on non-oil export, total export trade or import, yet none have delve into asymmetric relationship. This study aims to fills this void. Our result shows that the effects of exchange rate variations have both positive and negative displays with more negative asymmetry. This provides further insights in the nature of service asymmetries. (JEL Codes: C22, D43, E31, L71, Q41) Keywords: asymmetric cointegration, exchange rate adjustment, disaggregated, services

A Dynamic Linkage between Financial Development, Energy Consumption and Economic Growth: Evidence from an Asymmetric and Nonlinear ARDL Model

Developing countries, including Pakistan, need a considerable effort to withstand economic growth; however, these countries have to cope with greenhouse gases emission and other environmental concerns. Financial advancement gives rise to modern, sometimes even innovative and energy-efficient technologies and, thus, contributes to a decline in energy usage among market entities: organizations and households. The current study explores the nonlinear asymmetric relationship between economic growth (Y) and the selected exogenous variables in Pakistan by incorporating time series data spanning from 1971 to 2016. Economic growth was considered as a target variable, while energy consumption (EC), electric power consumption (EPC), financial development (FD), and energy imports (EM) were considered independent variables. To investigate cointegration among the given variables, a nonlinear ARDL bound testing approach was employed. BDS independence test was used to check the nonlinearity, and a structural break unit root test was used for testing data stationarity. The findings confirm the presence of co-integration in the selected variables. A symmetric unidirectional significant causality exists running from EPC to Y, while a bidirectional symmetric causality was found between FD and Y. In contrast, any negative shocks in EPC, FD, and EM were found to have a positive asymmetric effect on Y. Meanwhile, a neutral effect was found between EC and Y. The outcomes of this study can provide guidelines for future researchers and policymakers.

The effects of the global financial crisis on the asymmetric relationship between exchange rate volatility and trade flows

Recent literature has shifted to examining whether the relationship between exchange rate volatility and trade flows is symmetric or asymmetric. However, this literature does not provide consistent findings. We extend the existing literature by examining whether the asymmetric relationship between exchange rate volatility and trade flows changes as a result of the global financial crisis. For this purpose, we use a nonlinear ARDL model on both the pre and the post-crisis period data. The pre-crisis and post-crisis periods cover the data from January 1986 to August 2008 and September 2008 to January 2018 respectively. Results indicate that the relationship changes as a result of global financial crisis however, this relationship is country specific as well on the type of model (export or import) selected.

The effects of the global financial crisis on the asymmetric relationship between exchange rate volatility and trade flows

Recent literature has shifted to examining whether the relationship between exchange rate volatility and trade flows is symmetric or asymmetric. However, this literature does not provide consistent findings. We extend the existing literature by examining whether the asymmetric relationship between exchange rate volatility and trade flows changes as a result of the global financial crisis. For this purpose, we use a nonlinear ARDL model on both the pre and the post-crisis period data. The pre-crisis and post-crisis periods cover the data from January 1986 to August 2008 and September 2008 to January 2018 respectively. Results indicate that the relationship changes as a result of global financial crisis however, this relationship is country specific as well on the type of model (export or import) selected.