CBN Journal of Applied Statistics (JAS)


Currency Substitution, Demand for Money Function; Autoregressive Distributed Lag Approach; Monetary Policy


This paper examines the existence, causes and effects of currency substitution in Nigeria by estimating conventional money demand equations based on a partial adjustment and an autoregressive distributed lag models using three definitions of monetary aggregates. The behavior of the foreign currency/Naira deposit ratios have been influenced by devaluation expectations, exchange rate risks and political uncertainties during the Yar’adua-Jonathan presidency. Also, the money demand estimations reveal that short-term foreign interest rates significantly affect the demand for the Naira, suggesting strong evidence of currency substitution and the possibility of importing considerable instability in the economy.

Author Bio

The author is a staff of the Statistics Department, Central Bank of Nigeria, Abuja – Nigeria.

Publication Title

CBN Journal of Applied Statistics







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