EFFECT OF COVID-19 PANDEMIC ON FOREIGN EXCHANGE RATE VOLATILITY
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Date
2022
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Publisher
University of Oum El Bouaghi
Abstract
The outburst of the Covid-19 brought anxiety that led to social distancing,
stay at home, restriction in traveling locally and internationally, and
finally, the financial instability globally as many economic activities shut
down. Consequently, the study examined the effect of the coronavirus
pandemic on exchange rate volatility from February 29, 2020, to March
31, 2021. The study utilized two-time series data which were sourced from
daily reports on covid-19 from the Nigerian Centre for Disease Control
(NCDC) and daily exchange rates US$/Nigerian₦ from the Central Bank
of Nigeria (CBN) statistical bulletin. The study used Error Correction
Model (ECM) to analyze the data. The bound test was used in the survey
to establish a level of association between the independent variables and
the regressor set. The findings revealed that daily reported COVID-19
instances, daily death cases, and cumulative death cases had a positive
effect on Nigerian exchange rate volatility. Conversely, confirmed
cumulative coronavirus cases do not impact the exchange rate in Nigeria
in the short run. Coronavirus significantly affected all macroeconomic
indices, including the exchange rate. The study will be helpful to the
government and its agencies in the determination of the palliatives for the
needy citizens. It will also help the policy makers to develop strategies
that can stabilize the economy and health sector to reduce the effect of the
pandemic on the citizenry
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Keywords
COVID-19 Pandemic, Foreign Exchange Rate Volatility, Error Correction Model