Abstract

<p>This study employs a comprehensive panel vector autoregressive (VAR) model to investigate the dynamic multivariate interactions among key macroeconomic variables, including exchange rates, foreign reserves, and gross domestic product (GDP), in Nigeria, Ghana, and Cameroon from 1960 to 2022. The research findings unveil that variations in GDP per capita and foreign reserves collectively account for 99.8% of the fluctuations observed in foreign exchange rates over the study period. However, the study concludes that GDP per capita and foreign reserves exhibit no significant influence on foreign exchange rates at specific lags, with nuanced effects observed in various lag scenarios. Notably, the first lag of GDP per capita, foreign reserves, and the second lag of foreign exchange rates display negative effects on foreign exchange, while other lags demonstrate positive effects. The absence of a cointegrating relationship among variables suggests the suitability of the panel VAR model for the dataset, further validated by unit root tests establishing stationarity. Impulse response analysis is conducted to trace the transmission of shocks within the system, highlighting the model's capabilities. The study estimates random and fixed effects components, with the Hausman Test favoring the fixed effect model. Hypothesis testing reveals joint significance between foreign exchange rates (both lags) and GDP per capita, while foreign reserves (both lags) do not have a joint significant effect on GDP per capita. Similarly, GDP per capita (both lags) demonstrates joint significance on foreign exchange rates, whereas foreign reserves (both lags) do not have a joint significant effect. The study concludes that foreign exchange rates (both lags) do not exhibit a joint significant effect on foreign reserves, providing valuable insights into the intricate macroeconomic dynamics within the studied countries</p>