Impact of Trade Openness and Exchange Rate on Micro-Small & Medium Enterprises (MSMEs) 1999-2022
DOI:
https://doi.org/10.54536/jpp.v1i1.2613Keywords:
Micro-Small, Medium Enterprises, Exchange Rate, Trade OpennessAbstract
This research examined the influence of trade accessibility and currency exchange rates on the growth of Micro-Small and Medium Enterprises (MSMEs) in Nigeria. An Autoregressive Distributed Lag (ARDL) model was employed to explore the immediate and long-term relationships among these factors. The ARDL results indicate a positive relationship between MSME growth and its previous values, both at the initial and subsequent lags, in the short term. However, a negative association emerges in the long-term analysis. Additionally, MSME growth shows a positive correlation with past values of the exchange rate (EXCR) in the short term, while an inverse relationship is observed in the long term. Conversely, an unfavorable connection exists between MSME growth and previous Trade Openness (TOP) values at the initial and subsequent lags in the short term. Yet, a positive correlation is depicted in the long-term perspective. This study concludes that trade accessibility significantly impacts the development of micro-small and medium-sized enterprises in Nigeria. For the country to achieve inclusive growth, its economy should be open to importing raw materials, semi-finished products, and technical expertise to improve domestic production processes and support the exportation of finished goods. This openness expands market opportunities for entrepreneurs within Nigeria. Furthermore, maintaining a stable exchange rate is essential to encourage both foreign and domestic business ventures in the country.
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