Abstract
This study evaluates the transmission channels between exchange rate, unemployment,
inflation and economic growth through a multivariate trend and structural analysis. The scope of the
research is from 1986 to 2013 using annual time series data collected from the CBN statistical
Bulletin. This study employs the Vector Auto-regressive model through the ARDL bound test for co-integration.
The study reveals that empirically, there exists significant relationships between
exchange rate, unemployment, inflation and economic growth. It is therefore recommended that
massive investments should be carried out in the real sector of the economy, policy maker should try
to cushion the effect of inflation on the economy when the need arises, government should increase
aggregate demand in the economy to ensure that there is increase in domestic productivity, decision
makers should establish the buying of exchange rate in such a way so as to enhance foreign direct
investment. It is also recommended strongly that special attention be given to policy implementation.

Table of contents
Title page………………………………………………………………………………i
Declaration…………………………………………………………………………..ii
Certification………………………………………………………………………….iii
Dedication……………………………………………………………………………iv
Acknowledgement…………………………………………………………………...v
Abstract……………………………………………………………………………….vi
Table of contents…………………………………………………………………….vii
List of figures………………………………………………………………………...x
List of tables………………………………………………………………………….xi
CHAPTER ONE: GENERAL INTRODUCTION
1.1. Introduction/ background of the study………………………………….1
1.2. Statement of the research problem……………………………………...3
1.3. Research questions……………………………………………………...4
1.4. Research hypothesis…………………………………………………….4
1.5. Objectives of the study………………………………………………….4
1.6. Significance of the study………………………………………………..4
1.7. Organisation of the work………………………………………………..5
CHAPTER TWO: LITERATURE REVIEW
2.1. Definition of concepts…………………………………………………..6
2.1.1. Exchange rate…………………………………………………………...6
2.1.2. Unemployment…………………………………………………………..7
2.1.3. Inflation………………………………………………………………….8
2.1.4. Economic growth………………………………………………………..9
2.1.5. Volatility…………………………………………………………………10
2.1.6. Foreign exchange management in Nigeria………………………………11
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2.1.7. Unemployment in Nigeria……………………………………………….13
2.1.8. Inflation in Nigeria………………………………………………………13
2.1.9. The Nigerian economic growth: An overview…………………………..14
2.2. Theoretical literature review……………………………………………..15
2.2.1. Theories of exchange rate determination………………………………...15
2.2.2. Theories of economic growth…………………………………………….20
2.2.3. Theories of unemployment……………………………………………….23
2.2.4. Theories of inflation………………………………………………………25
2.3. Empirical literature……………………………………………………….28
2.3.1. Gap in the empirical literature……………………………………………29
CHAPTER THREE: METHODOLOGY
3.1. An overview……………………………………………………………….30
3.2. Theoretical framework…………………………………………………….30
3.3. Data and scope of the study………………………………………………..30
3.4. Ex- ante analysis diagnostic test…………………………………………...30
3.4.1. Descriptive properties of the series………………………………………...31
3.5. Heteroskedasticity test……………………………………………………..34
3.6. Model specification………………………………………………………...36
3.7. Technique of estimation……………………………………………………36
3.8. Ex- post diagnostic test……………………………………………………..36
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.0. An overview……………………………………………………………………37
4.1. Stochastic properties of the series……………………………………………...37
4.1.1. Trend analysis of the variables…………………………………………………37
4.2. Econometric analysis and discussion of results………………………………..44
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4.2.1. Unit root test……………………………………………………………………44
4.2.2. ARDL bound test for co-integration……………………………………………45
4.2.3. VAR model for GDP growth rate function……………………………………..48
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.0. Overview………………………………………………………………………..51
5.1. Summary………………………………………………………………………..51
5.2. Conclusion………………………………………………………………………51
5.3. Recommendation………………………………………………………………..52
BIBLIOGRAPHY………………………………………………………………..53
EMPIRICAL TABULATIONS………………………………………………….56
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LIST OF FIGURES
Figure 2.1. Demand- pull inflation…………………………………………………….14
Figure 2.2. Cost- push inflation……………………………………………………….15
Figure 2.3. Cyclical unemployment……………………………………………………43
Figure 3.1. Positive and negative skewness……………………………………………57
Figure 4.1. Trend of exchange rate……………………………………………………..66
Figure 4.2. Trend of gross domestic product……………………………………………68
Figure 4.3. Trend of inflation……………………………………………………………74
Figure 4.4. Trend of unemployment……………………………………………………..76
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