ABSTRACT

This study seeks to examine the effect of exchange rate fluctuation on output gap in Nigeria. This work set out to determine the effect of exchange rate fluctuation on output gap for the period of 1981-2015. Given the nature of the objectives of the study, the ordinary least square econometric techniques were used in estimating the model. The major empirical findings of the study include; break point method of regression test result which revealed that the dependent variable has a break point and the variables has no serial correlation. This implies that, there is no significant relationship between exchange rate fluctuation and output gap in Nigeria, that is there is no existence of long run relationship between exchange rate fluctuation and output gap in Nigeria. The implication of this finding is that, when there is fluctuation in exchange rates i.e. increase or decrease, it will result to a reduction in output gap. This study recommend that, the government of Nigeria should also evolve policies that will control fluctuations in exchange rate in the country.