Abstract: This study investigates the response of trade balance to exchange rate changes in Nigeria. The long-run relationship between these variables is explored using Engel-Granger Two-Stage, Johansen and the Autoregressive Distributed Lag cointegration approaches on a data sample between 1980:Q1 and 2007:Q4. The analyses show that there is only limited adjustment in the trade balance to exchange rate shocks in both the short- and long-run. Apparently, trade balance adjustment to exchange rate depreciation in Nigeria is prolonged. Although rightly signed (negative), it appears that that the elasticities of demand for export and import have not sufficiently adjusted to lead to improvement of trade balance thereby failing to depict a J-curve.
Abimbola M. Oyinlola, Olusegun A. Omisakin and Oluwatosin A. Adeniyi, 2013. Do Trade Balances Adjust to Exchange Rate Shocks? An Enquiry Evidence of J-Curve in Nigeria. The Social Sciences, 8: 72-79.