Udah, E.B., Department of Economics, University of Calabar, Nigeria
This study attempted using OLS estimation technique to investigate the open macroeconomic variables that could be applied as policy instruments to make the Nigerian economy more resilient to adverse effects of participation in international trade. To test for unit root and the existence of long-run relationship among the variables under scrutiny, the study employed the Ng and Perron (2001) modified unit root test and the Engle and Granger two step procedure/Error correction approach. The parsimonious results showed that the variables of interest were statistically significant and conform to a priori economic expectations. These include the export diversification index, external reserves, government expenditure on economic and social services and financial sector variables. The result revealed that for Nigeria to strengthen her resilience to external and domestic distortions, she needs to deepened her financial markets, strengthen government expenditures on economic and social services, diversify her export portfolio of goods and also strengthen the external reserves. The external reserves could be applied to projects that enhance economic growth and development during period of economic and financial crises and stabilize aggregate demand without having to fear any future cuts in public expenditures or a rise in tax rates. Therefore, it would be advantageous in the long-run for the country to stop the current practice of sharing the proceeds from 'excess crude oil account' among the three tiers of government and maintain fiscal discipline. © EuroJournals Publishing, Inc. 2011.
