ABSTRACT

J-curve hypothesis suggest a specific pattern for the response of trade of balance to exchange rate changes. This study tries to validate the existence of j-curve hypothesis in the Nigeria non-oil sector from 1981-2015. Using ordinary least square (OLS). The study found out that j-curve hypothesis (using exchange rate as a proxy to devaluation) had a negative relationship with Trade balance. On the basis of the findings, government should devalue the exchange rate as it will shift individual demand from imported goods to locally produced goods thereby increasing Trade balance.