ABSTRACT
This work sets out to examine the relationship between balance of payment and
exchange rate. The work is divided into five chapters; chapter 1 gives a general
introduction to the subject matter, chapter two gives the general review of literature
in the subject matter, chapter 3 gives or states the methodology and specifies the
model used for testing. Chapter four runs the required test and provides the result
as well as the interpretation and chapter five concludes the findings and
recommends policy for the government based on the findings in the test.The
ordinary least square regression (ols) method is used to test for R-squared test
(explanatory power of the variables), T-test for the reliability, F-test for the overall
significance of the exponentials and D.W test which is the econometric criterion
for testing for presence of auto regressive scheme. The result shows a negative
relationship between balance of payment and trade openness, also there exists a
positive relationship between exchange rate and foreign direct investment. Since
trade openness has a negative impact on the balance of payment it is recommended
that the government should not consider it a policy for economic development.TABLE OF CONTENT
Title page ------------------------------------------------------------- ------- i
Certification --------------------------------------------------------- ------- ii
Dedication --------------------------------------------- -------------- ------- iii
Declaration ----------------------------------------------------------- ------- iv
Acknowledgement -------------------------------------------------- -------- v
Abstract ------------------------------------------------------------- -------- vi
Table of content ------------------------------------------------------------ vii
CHAPTER ONE
INTRODUCTION
1.1 Background of Study --------------------------------------------- 1
1.2 Statement of research problem --------------------------------------- 2
1.3 Objective of the study --------------------------------------------- 3
1.4 Research Hypothesis ------------------------------------------------ 4
1.5 Scope of study ----------------------------------------------- -------- 4
1.6 Significance of study ---------------------------------------- ------- 4
CHAPTER TWO
REVIEW OF LITERATURE AND THEORETICAL FRAME WORK
2.1 Introduction------------------------------------------------------------- 7
2.2 Theoretical Concept in exchange rate------------------------ --------- 7
2.3 Literature Review ---------------------------------------------- --------- 82.3.1 Exchange system and monetary standards in Nigeria------- -------- 10
2.3.2 Types of Exchange rate--------------------------------------- -------- 23
2.3.3 Factors affecting rate of exchange -------------------------- ------- 26
2.3.4 Instruments of foreign payment ------------------------------- ------- 31
2.3.5 Foreign Exchange market------------------------------------- ------- 31
2.3.6 Theories of Rate of Exchange-------------------------------- ------- 33
2.3.7 Exchange rate policy in Nigeria------------------------------ ------- 36
2.4 Summary of Literature review-------------------------------- -------- 38
2.5 Theoretical Framework -------------------------------------- -------- 39
2.5.1 Balance of payment or modern theory----------------------- --------- 39
2.5.2 Features of Balance of payment------------------------------- -------- 41
2.5.3 Distinguishing between balance of payment and balance of trade-- 43
2.5.4 Components of balance of payment--------------------------------- 45
2.5.5 Disequilibrium in balance of payment ------------------------------ 46
2.5.6 Methods of correcting or adjusting disequilibrium---------------- 53
2.5.7 The effect of exchange rate devaluation on the balance of payment-- 55
CHAPTER THREE
METHODOLOGY AND MODEL SPECIFICATION
3.0 Methodology---------------------------------------------------------- 58
3.1 Model specification------------------------------------------------- 583.2 Estimation techniques and method of data analysis---------------- 59
3.2.1 Statistical test---------------------------------------------------------- 59
3.2.2 Economic A priori test----------------------------------------------- 61
3.2.3 Econometric Test------------------------------------------------------ 61
3.3 Source of Data required and data required------------------------ 62
CHAPTER FOUR
4.1 Presentation of Analysis---------------------------------------------- 64
4.1.1 Presentation of Result------------------------------------------------ 64
4.1.2 Interpretation of Result---------------------------------------------- 64
4.2 Evaluation Based of Statistical test---------------------------------- 65
4.2.1 Coefficient of Determinant----------------------------------------- 65
4.2.2 The T-test-------------------------------------------------------------- 65
4.2.3 The F test-------------AAA------------------------------------------------- 66
4.3 Economics criterion-------------------------------------------------- 664.4 Econometric test------------------------------------------------------ 67
CHAPTER FIVE
5.1 Summary of Findings------------------------------------------------ 69
5.2 Conclusion------------------------------------------------------------- 69
5.3 Recommendation----------------------------------------------------- 70
Bibliography --------------------------------------------------------- 72
Appendix ------------------------------------------------------------- 74
