This study examined the long-run and short-run impacts of real exchange rate volatility and the level of economic growth on international trade in Nigeria using a vector error correction model on time series annual data from 1971 to 2012. The results revealed that in both short-run and long-run, exports and imports were chiefly influenced by real exchange rate, real exchange rate volatility, foreign income, gross domestic product, terms of trade and changes in exchange rate policies. The findings further revealed that exchange rate volatility depressed exports and imports in the long-run. The result from pair wise Granger causality test revealed unidirectional causality running from export to exchange rate volatility and from exchange rate volatility to import and a unidirectional causality flow from RGDP to imports and exports. This is an indication of poor performance of the export sector and the over dependence of the country on imported goods. The statistical significance of both real foreign income and real gross domestic product were indications that tariff measures would be ineffective and as a result the study believed that effective import substitution industrialization would significantly reduce pressure on the external sector and will actually increase economic activities and hence economic growth The study recommends the use of supportive fiscal and monetary policies that will provide a set of incentives aimed at removing anti-export bias barriers so as to promote exports, particularly non-oil exports and discourage import of consumer goods to stabilize the foreign exchange rate.
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