We examine the effects of a “bubble” in the foreign exchange market, defined as an exogenous process that temporarily shifts the exchange rate away from the value implied by fundamentals. The bubble process is analogous to Bernanke and Gertler's (1999) specification of an asset price bubble....

This paper reviews the historical performance of monetary policy in Nigeria and discusses the relative merits of alternative monetary policy strategies that Nigeria could adopt in the future, once the many operational issues that today obstruct the conduct of monetary policy have been addressed....