Exchange rate and inflation: is there a relationship in Nigeria
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Date
2014-12
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Central Bank of Nigeria, Research Department
Abstract
This paper attempts to examine the link between exchange rate and domestic price level in Nigeria. Employing the VAR technique, the study used monthly series of inter-bank rate, world export prices, real gross domestic product, oil prices and consumer price index from 2000MI to 2015MI. The results from the study show that exchange rate pass-through to price level is high. a shock to exchange rate (depreciation) would increase domestic price by 0.72 per cent in the first month. The effect rose to 0.82, 0.85 and 0.86 per cent in month 2,4 and 6, respectively, before it began to fall. By the sixth month, it stood at around 0.84 per cent, on the average. Also the results of the VAR model and exchange rate pass-through coefficients indicate that pass-through to price level in Nigeria is partial or incomplete.
Description
Keywords
Exchange rate, Inflation, Exchange rate pass-through, Foreign exchange markets, Inflation theory
Citation
Mordi, C.N.O. (2014). Exchange rate and inflation: is there a relationship in Nigeria. CBN Economic and Financial Review. 52(4), 105-123.