Testing the J-curve, Marshall-Lerner condition and Thirlwall hypothesis - empirical evidence from Nigeria Online publication date: Tue, 02-Jul-2024
by Olajide Oyadeyi
International Journal of Business and Emerging Markets (IJBEM), Vol. 16, No. 3, 2024
Abstract: The paper examined whether the J-curve, Marshall-Lerner condition and Thirlwall hypothesis hold for Nigeria, while also accounting for causality effects between the exchange rate and the current account from 1981 to 2021. The study adopted the autoregressive distributed lag and vector autoregressive causality tests to achieve these objectives. The paper suggests that exchange rate depreciation would improve Nigeria's current account balance by increasing exports and/or decreasing imports, thereby consistent with the Marshall-Lerner hypothesis. The paper also found that the estimated elasticity of imports coefficient from the long-run rate of growth is not equal to the actual export volume average as a percentage of the GDP. The findings suggested that while the Marshall-Lerner condition holds, the J-Curve phenomena and the Thirlwall hypothesis are not satisfied for Nigeria. Finally, the paper confirms the notion that causality runs from the exchange rate to the current account for Nigeria.
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