Revisiting Remittance and Exchange Rate Volatility Nexus in Nigeria: The Role of Geopolitical Risk and Economic Policy Uncertainty

This study seeks to understand the extent to which uncertainty stemming from geographical risk and changes in economic policy affects the potential of remittances as a stabilising (amplifying) factor in exchange rate volatility. By utilising the Generalized Autoregressive Conditional Heteroskedasticity (GARCH)-Mixed Data Sampling (MIDAS) approach, our research provides compelling evidence that remittance inflows contribute to increased fluctuations in exchange rates. Specifically, we demonstrate that the destabilising effect of remittances becomes more pronounced in environments characterised by heightened economic policy uncertainty and rising geopolitical risk. In conclusion, although remittances are generally beneficial, the impact that they have on the stability of exchange rates is complicated and can be complicated even more by the uncertainty that arises from changes in economic policy and elements of geopolitical circumstances.