Authors : Godwin Akpokodje and Benson U. Omojimite
Abstract: The volatile nature of exchange rates especially since the demise of the Bretton Woods system of exchange rates and the consequent adoption of a flexible one was a major source of concern to developing countries. The anxiety principally was that exchange rates are more volatile in a floating regime, thereby constituting a source of risk to trade and can therefore, negatively affect imports which are critical to the growth of developing countries. The study investigates the effect of exchange rate volatility on the imports of ECOWAS countries over the 1986-2006 period during, which the countries operated a flexible exchange rate system. An import model was estimated with exchange rate volatility as one of the independent variables. But as a prelude to this, the exchange rate volatility series were generated utilizing the GARCH model. Exchange rate volatility was found to negatively affect the imports of the panel of all ECOWAS countries. However, the effect on the sub-groups was mixed. While exchange rate volatility negatively affects the imports of the group of non-CFA countries, its effect on the group of the CFA countries is positive.
Godwin Akpokodje and Benson U. Omojimite , 2009. The Effect of Exchange Rate Volatility on the Imports of ECOWAS Countries. The Social Sciences, 4: 340-346.