Abstract

Achieving sustainable and stable economic development requires a stability in the exchange rate movement. This is because exchange rate fluctuations are an important risk that a country experience at micro and macro levels. Existing literature on international economics argued that exchange rates usually fluctuate as monetary variables increase or decrease. This study examined the determinants of exchange rate fluctuation using Sticky-Price Monetary model in Nigeria. The paper employed correlational research design using secondary quarterly data for a period 20016Q1 to 2017Q1. The techniques of data analysis adopted is Autoregressive Integrated Moving Average (ARIMA) regression technique. The study found that monetary variables significantly affect exchange rate fluctuations in Nigeria during the period under review. The findings indicate that interest rate and levels of inflation significantly and positively impacted on the exchange rate fluctuations in Nigeria. While money supply has an insignificant negative effect on the fluctuations of exchange rate, and productivity has an insignificant positive effect on the exchange rate fluctuation. The paper recommends that to achieve the goal of stable economic growth in Nigeria, governments as well as its policy-makers should consider exchange rate fluctuations when design monetary policies. That is, money supply, interest rate, inflation and productivity should be consider in relation to exchange rate movements.