Antonopoulos tested the so-called “Shaikh hypothesis”, which states that the RER is fundamentally determined by the ratio of relative real unit labour costs (as a proxy for productivity differentials) of tradable goods between two countries. However, Antonopoulos’s model added capital flows to the “Shaikh hypothesis” and employed cointegration methodology on Greece’s data covering the period 1960-1990. The study provided evidence that RER movements cannot be explained by the PPP hypothesis, that there was a strong role of the productivity of the export sector of Greece vis-a-vis that of the rest of the world, and that there is a less important role of net capital inflows. The evidence in this study suggested that an improvement in the relative productivity of Greece’s export sector and in capital inflows appreciated the country’s RER.
Ubok-Udom highlighted the contentious issue that surrounded the implementation of the SAP stating that the peculiar features of the Nigerian economy would lessen the efficacy of currency depreciation in producing desirable effects. He examined the relationship between exchange rate dynamics (and currency depreciation) and the growth of domestic output in the Nigerian economy over a 25 year period. He expressed the growth of domestic outputs (total GDP, non-oil GDP and oil-GDP) as a linear function of variations in the average nominal exchange rate, while a dummy variable was used to capture the period of currency depreciation and a time variable which may reflect the influence of any time trend effect on output growth. This equation was estimated using the naira valued output respectively. The empirical results of this study showed that all the coefficients of the major explanatory variables have negative signs in all the estimated equations. He explained this result by stating that the rate of growth of total and non-oil GDPs tend to decline or rise with a fall or a rise in the nominal naira / US dollar exchange rate. Further, the results revealed that the coefficients of these major explanatory variables in the equations estimated with the naira-valued GDP were statistically insignificant. Moreover, it was shown that in the dollar-valued GDP, the coefficients of the major explanatory variables were statistically significant at 5.0 and 10.0 percent levels and that they have negative signs as stated earlier. He concluded that the results were generally in contrast with the theoretical expectations that currency depreciation promotes domestic output growth. He also stressed the need for further investigation so as to be sure of the exact relationship between devaluation or currency depreciation and GDP growth in Nigeria. read only
Ogun examined the impact of RER on growth of non-oil export in Nigeria. Specifically, he analyzed the effects of real exchange rate misalignment and volatility on the growth of non oil exports. He employed the standard trade theory model of determinants of export growth and two different measures of real exchange rate misalignment, one of which entailed deviations of purchasing power parity (PPP) and the other was model based estimation of equilibrium RER. He reported that, irrespective of the alternative measures of misalignment adopted, both RER misalignment and volatility adversely affected growth of Nigeria’s non-oil export.