EXCHANGE RATE VOLATILITY AND MACROECONOMIC PERFORMANCE IN SELECTED AFRICAN COUNTRIES

Abstract

This study examines the effect of exchange rate volatility on the macroeconomic performance of Selected African Countries (Kenya, Nigeria, South Africa, and Egypt). The study period spans from 1990 to 2022, and data were sourced from the Central Bank of Nigeria Statistical Bulletin and World Bank’s Development indicators (WDI). The specific objective is to examine the impact of exchange rate volatility on economic growth and Balance of Payments. In order to achieve the objective, the study adopted an ex-post facto design, panel regression methodology, and classical least squares (CLS) regression techniques for analysis. Findings from the study revealed that exchange rate volatility has a positive impact on balance of payments. However, exchange rate volatility has a negative impact on economic growth, implying that upward swings in exchange rate volatility will hurt economic growth eventually. Based on these findings, this study suggests that to reduce the effect of exchange rate volatility on economic growth, governments of various countries should strive to encourage foreign remittances by creating an appropriate atmosphere and also ensure a stable exchange rate that would reduce uncertainties for producers, especially in the importation of raw materials