Does exchange rate regime affect macroeconomic performance?

This research finds out if a significant difference exists between macroeconomic performance- (Gross Domestic Product, Inflation, Foreign Direct Investment and Trade Openness) as proxy during fixed and flexible exchange rate regimes in Nigeria. It adopts the Chow model,which is useful in determining whether two estimated functions are significantly different. Results show that there is a clear cut difference between macroeconomic performances during the two regimes. For the flexible exchange rate regime, all the coefficients are highly significant at 95% confidence interval and satisfy apriori expectation. With an R2 value of 91%, the flexible exchange rate regime is found as a better regime choice. Also, an F-statistic value of 52.1for flexible exchange regime as against 9.3for fixed exchange rate regime, indicate that the former regime is better than the latter. The paper therefore recommends that government should pursue policies that promote deregulation of the exchange rate regime.