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Using quarterly data from 1986-2011, this study investigates the impact of
financial openness on output volatility in Nigeria. The paper adopts two measures of financial
openness: de facto (total capital flow variables) and de jure (Chin-Ito Index measures)for
empirical analysis. The study applies the Generalized Autoregressive Conditional
Heteroscedasticity (GARCH) Model to address its core objective. The results show that
none of the two measures of financial openness contributed to output volatilityin Nigeria,
within the period under review.The paper therefore recommends that the government and
monetary authorities in Nigeria should lay more emphasis on developing amore robust
domestic economic structural reforms that will promote competitive and viable domestic
banking system, with adequate regulatory and supervisory framework. This should also be
complemented by other macroeconomic stabilization policies. That means, fiscal deficits,
rapidly depreciating exchange rate and high inflation should beput in check. This is one of
the ways to ensure that financial openness continues to contribute togrowth while lowering
output volatility.
