TITLE:
Do Productivity Shocks in the United States Matter to Components of Nigeria’s External Sector?
AUTHORS:
Cukwuemeka O. Onyimadu, Clifford C. Agbaeze, Daniel U. Sunday
KEYWORDS:
Exogenous Shocks, External Sector, Macroeconomic Modelling, Productivity Shocks
JOURNAL NAME:
Theoretical Economics Letters,
Vol.10 No.1,
February
25,
2020
ABSTRACT: The
paper examines the effects of United States productivity shock on components of
Nigeria’s external sector. Using a structural Macroeconomic Model (SMM), the
paper modelled Nigeria’s external sector by using ten behavioural equations and
four identities. The SMM was simulated, using a 3% increase and 3% decrease in
US productivity to elicit responses of Nigeria’s external sector components to
this shock. Using quarterly data from 1981 to 2015, the paper found that both
positive and negative US productivity shocks elicited symmetrical responses
from Nigeria’s external sector components. Also, both positive and negative
shocks had little effects on Nigeria’s current account balance, imports,
exports, foreign direct investments and reserves. However, positive shocks
increased remittances inflow, a depreciation in nominal exchange rates, a reduction
in foreign portfolio investment position, and a reduction in foreign debt
flows. The responses for a negative US productivity shock were just the direct opposite
of a positive shock. Our finding shows that, the
components of Nigeria’s external sector will respond in like manner to both
positive and negative shocks to United States productivity.