Udoma Johnson Afangideh, Tuwe Soro Garbobiya, Farida Bello Umar, Nuruddeen Usman, Victor Unekwu Ocheni and Sanusi Muhammad Yakubu
This paper is focused on determining the asymmetric effects of exchange rate on money demand function in Nigeria.
Abstract
Purpose
This paper is focused on determining the asymmetric effects of exchange rate on money demand function in Nigeria.
Design/methodology/approach
It employs the empirical model of Baumol–Tobin. Baumol (1952), which was founded on the opportunity and transaction cost of holding money. Monetary aggregates, M1, M2 and M3, are used for the real money balances based on the nonlinear Autoregressive Distributed Lag bound testing procedure.
Findings
The results indicate that the positive and negative partial sum of exchange rate changes differ in magnitude and size, supporting the hypothesis of asymmetric effects of exchange rate changes on the demand for money in Nigeria.
Originality/value
This is the first paper to consider the new broad money aggregate (M3).