Exchange Rate Policy Design: Choosing the Right Exchange Rate Response in a Changing Environment

Abstract

This article examines exchange rate policy design with reference to how to choose the appropriate exchange rate Response for the right environment. The article is structured into four parts with the introduction as part I. Part II gives the overview of Nigeria's exchange rate framework. Part III reviews different concepts of equilibrium exchange rates with a focus on the fundamental equilibrium exchange rate (FEER) and the behavioural equilibrium exchange rate (BEER) approaches. Part IV discusses the challenges encountered in choosing the right exchange rate response in the new banking sector environment. Part V concludes the paper and proffers the way forward.