<abstract xmlns="http://www.w3.org/1999/xhtml">Aim/Purpose: The purpose of this study is to investigate Productivity Bias Hypothesis (PBH) in Nigeria using parallel (black) market exchange rate.Design/Methodology/Approach: The study focused on Naira-Dollar (N/$) parallel market exchange rate. Quarterly data from 1995 to 2018 were used. Data on domestic productivity and parallel market exchange rate were sourced from Central Bank of Nigeria (CBN) statistical bulletin, 2018 edition. US productivity data was sourced from Federal Reserve Economic Data. Autoregressive Distributed Lag (ARDL) was used as the estimation technique.Findings: The result reveals that parallel (black) market exchange rate support the presence of productivity bias hypothesis in Nigeria. Furthermore, the purchasing power parity hypothesis was rejected using the conventional unit root test. This implies that using official exchange rate, the study rejects the productivity bias hypothesis.Research Implications/Limitations: The implication of the study is that exchange rate in Nigeria should be determined freely in the foreign exchange market.Originality/Value/Contribution: Previous studies have used official exchange rate to test the validity of the productivity bias hypothesis, and the results can be basically described as mixed. Hence, this study differs from extant studies as it examined productivity bias hypothesis using parallel market exchange rate.</abstract>

Aim/Purpose: The purpose of this study is to investigate Productivity Bias Hypothesis (PBH) in Nigeria using parallel (black) market exchange rate.Design/Methodology/Approach: The study focused on Naira-Dollar (N/$) parallel market exchange rate. Quarterly data from 1995 to 2018 were used. Data on domestic productivity and parallel market exchange rate were sourced from Central Bank of Nigeria (CBN) statistical bulletin, 2018 edition. US productivity data was sourced from Federal Reserve Economic Data. Autoregressive Distributed Lag (ARDL) was used as the estimation technique.Findings: The result reveals that parallel (black) market exchange rate support the presence of productivity bias hypothesis in Nigeria. Furthermore, the purchasing power parity hypothesis was rejected using the conventional unit root test. This implies that using official exchange rate, the study rejects the productivity bias hypothesis.Research Implications/Limitations: The implication of the study is that exchange rate in Nigeria should be determined freely in the foreign exchange market.Originality/Value/Contribution: Previous studies have used official exchange rate to test the validity of the productivity bias hypothesis, and the results can be basically described as mixed. Hence, this study differs from extant studies as it examined productivity bias hypothesis using parallel market exchange rate.

Productivity Bias Hypothesis: New Evidence from Parallel Market Exchange Rate

ECONOMICS

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"Productivity Bias Hypothesis: New Evidence from Parallel Market Exchange Rate"}

Aim/Purpose: The purpose of this study is to investigate Productivity Bias Hypothesis (PBH) in Nigeria using parallel (black) market exchange...

Productivity Bias Hypothesis: New Evidence from Parallel Market Exchange Rate

Published Online: Jul 09, 2020

Page range: 31 - 40

Received: May 14, 2020

Accepted: May 25, 2020

DOI: https://doi.org/10.2478/eoik-2020-0003

Keywords
Purchasing Power Parity, Productivity Bias Hypothesis, Productivity Differentials, Parallel Market Exchange Rate, Black Market Exchange Rate

© 2020 James Temitope Dada et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Productivity Bias Hypothesis: New Evidence from Parallel Market Exchange Rate

Published Online: Jul 09, 2020

Page range: 31 - 40

Received: May 14, 2020

Accepted: May 25, 2020

DOI: https://doi.org/10.2478/eoik-2020-0003

KeywordsPurchasing Power Parity, Productivity Bias Hypothesis, Productivity Differentials, Parallel Market Exchange Rate, Black Market Exchange Rate

© 2020 James Temitope Dada et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
Purchasing Power Parity, Productivity Bias Hypothesis, Productivity Differentials, Parallel Market Exchange Rate, Black Market Exchange Rate