Do Exchange Rate Changes have Symmetric or Asymmetric Effects on Money Demand in Nigeria

Previous studies of the effects of exchange rate changes on Nigeria’s demand for money have assumed symmetry relationship. In this paper, we examine the asymmetric effect of exchange rate on demand for money by constructing naira depreciation and appreciation. The study employed the linear and nonlinear auto-regressive distributed lag (ARDL) approach using quarterly data for the period 1960Q1-2017Q4. The results show that exchange rate changes have short-run and long-run asymmetric effects on demand for money in Nigeria and that when nonlinearity was introduced there is stability of money demand.