Economics

| Peer-Reviewed |

Exchange Rate Pass-Through in Nigeria

Received: 09 May 2015    Accepted: 23 May 2015    Published: 17 June 2015
Views:       Downloads:

Share This Article

Abstract

The paper seeks to determine the effect of exchange rate changes on consumer prices in Nigeria using recursive vector autoregression (VAR) model. It uses data from first quarter 2000 to fourth quarter 2013. The results of the investigation show that exchange rate fluctuation has a positive and insignificant effect on consumer prices and the increase in consumer prices are mainly due to its own shocks and the increase in money supply in the long run. A stable monetary policy with a low inflationary environment will lessen the pressure of exchange rate changes on consumer prices. So, the Central Bank of Nigeria should be less concern with the inflation impact of exchange rate shocks and focus fully on other objectives such as growth and export competitiveness in designing exchange rate policy.

DOI 10.11648/j.eco.20150403.11
Published in Economics (Volume 4, Issue 3, June 2015)
Page(s) 41-49
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Pass-Through, Exchange Rate, Vector Auto Regression (VAR)

References
[1] Achsani, N. A.; A. J. F.A. Fauzi and P. Abdullah (2010), “The Relationship between Inflation and Real Exchange Rate: Comparative Study between ASEAN+3, the EU and North America”, European Journal of Economics, Finance and Administrative Sciences – Issue 18, 69 – 76.
[2] Akinbobola T. O. (2012), “The Dynamics of Money Supply, Exchange Rate and Inflation in Nigeria”, Journal of Applied Finance and Banking, Vol. 2, no. 4, 117-141, Scienpress Ltd.
[3] Chamberlin, G. and L. Yueh (2006), Macroeconomics, UK: Thompson Learning.
[4] Chowdhury, M. I. and S. F. Siddique (2006), “Exchange Rate Pass-Through in Bangladesh”, Policy Analysis Unit (PAU) Working Paper Series No.WP0607, April.
[5] Dickey, D. A. and W. A. Fuller (1979), “Distribution of the Estimators for Autoregressive Time Series with a Unit Root, Journal of the American Statistical Association, 74, p. 427-431.
[6] Frimpong, S. and A. M. Adam (2010), “Exchange Rate Pass-Through in Ghana”, International Business Research, Vol. 3, No. 2, 186-192, April.
[7] Fullerton, T. M. Jr. and S. I. Ikhide (1998), “An Econometric Analysis of the Nigerian Consumer Price Index”, Journal of Economics, Volume 24, Number 2, Pages 1-15.
[8] Goldberg, P. and M. Knetter (1997), “Goods Prices and Exchange Rates: What Have We Learned?”, Journal of Economic Literature, Vol. 35, No. 3, September, pp. 1243-1272.
[9] Imimole, B. and A. Enoma (2011), “Exchange Rate Depreciation and Inflation in Nigeria(1986-2008)”, Business and Economic Journal, Volume 2011:BEJ-28, Pp 1-12.
[10] Johansen, S. (1988), “Statistical Analysis of Co-integrating Vectors”, Journal of Economic Dynamics and Control, 12, Pp. 231-54.
[11] Justel, S. and A. Sansone(2015), “Exchange Rate Pass-Through to Prices: VAR Evidence for Chile”, Working papers of the Central Bank of Chile, No.747, February.
[12] Kahn, G. A. (1987), “DollarDepreciation and Inflation”, Federal Reserve Bank of Kansas City Economic Review, Vol. 72, No. 9, November, pp. 32-49.
[13] Leigh, D. and M. Rossi (2002), “Exchange Rate Pass-Through in Turkey”, IMF Working Paper, WP/02/2004.
[14] McCarthy, J. (1999), “Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrialized Economies”, BIS Working paper No. 79.
[15] Menon, J. (1995), “Exchange Rate Pass-Through”, Journal of Economic Surveys, Vol. 9, No. 2, June, pp. 197-231.
[16] Minh, V. V. (2009), “Exchange Rate Pass-Through and its Implications for Inflation in Vietnam”, Vietnam Development Forum Working Paper Series No.0902, 1-66, April.
[17] Mirdala, R. (2014), “Exchange Rate Pass-Through to Domestic Prices under Different Exchange Rate Regimes”, Williams Davidson Institute Working papers, Number 1070, January, University of Michigan.
[18] Mishkin, F. (2008), “Exchange Rate Pass-Through and Monetary Policy”, NBER Working Paper 13889.
[19] Mohammed, K. S. et al (2015), “Exchange Rate Pass-Through In Algeria”, Mediterranean Journal of Social Sciences, Vol. 6, No. 2, March, MCSER Publishing, Rome-Italy.
[20] Ogundipe, A. A. and E. Samuel (2013), “Exchange Rate Pass-Through to Consumer Prices in Nigeria”, Scientific Papers: Journal of Business Management and Applied Economics, Vol. II, Issue 4, July.
[21] Sloman, J. (2006), Economics, Sixth Edition, UK: Pearson Education Limited.
[22] Tabi, H. N. and H. A. Ondoa (2011), “Inflation, Money and Economic Growth in Cameroon”, International Journal of Financial Research, Vol. 2, No. 1, March, www.sciedu.ca/ijfr.
[23] Taylor, J. B. (2000), “Low Inflation, Pass-Through and the Pricing power of Firms”, European Economic Review, 44:1389-1408.
[24] Zubair, A.; G. Okorie and A. R. Sanusi (2013), “Exchange Rate Pass-Through to Domestic Prices in Nigeria: An Empirical Investigation” , Economic and Financial Review, Volume 51, Number 1, March.
Author Information
  • Department of Economics, Faculty of Social Sciences, Kogi State University, Anyigba, Nigeria

Cite This Article
  • APA Style

    Mathias A. Chuba. (2015). Exchange Rate Pass-Through in Nigeria. Economics, 4(3), 41-49. https://doi.org/10.11648/j.eco.20150403.11

    Copy | Download

    ACS Style

    Mathias A. Chuba. Exchange Rate Pass-Through in Nigeria. Economics. 2015, 4(3), 41-49. doi: 10.11648/j.eco.20150403.11

    Copy | Download

    AMA Style

    Mathias A. Chuba. Exchange Rate Pass-Through in Nigeria. Economics. 2015;4(3):41-49. doi: 10.11648/j.eco.20150403.11

    Copy | Download

  • @article{10.11648/j.eco.20150403.11,
      author = {Mathias A. Chuba},
      title = {Exchange Rate Pass-Through in Nigeria},
      journal = {Economics},
      volume = {4},
      number = {3},
      pages = {41-49},
      doi = {10.11648/j.eco.20150403.11},
      url = {https://doi.org/10.11648/j.eco.20150403.11},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.eco.20150403.11},
      abstract = {The paper seeks to determine the effect of exchange rate changes on consumer prices in Nigeria using recursive vector autoregression (VAR) model. It uses data from first quarter 2000 to fourth quarter 2013. The results of the investigation show that exchange rate fluctuation has a positive and insignificant effect on consumer prices and the increase in consumer prices are mainly due to its own shocks and the increase in money supply in the long run. A stable monetary policy with a low inflationary environment will lessen the pressure of exchange rate changes on consumer prices. So, the Central Bank of Nigeria should be less concern with the inflation impact of exchange rate shocks and focus fully on other objectives such as growth and export competitiveness in designing exchange rate policy.},
     year = {2015}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - Exchange Rate Pass-Through in Nigeria
    AU  - Mathias A. Chuba
    Y1  - 2015/06/17
    PY  - 2015
    N1  - https://doi.org/10.11648/j.eco.20150403.11
    DO  - 10.11648/j.eco.20150403.11
    T2  - Economics
    JF  - Economics
    JO  - Economics
    SP  - 41
    EP  - 49
    PB  - Science Publishing Group
    SN  - 2376-6603
    UR  - https://doi.org/10.11648/j.eco.20150403.11
    AB  - The paper seeks to determine the effect of exchange rate changes on consumer prices in Nigeria using recursive vector autoregression (VAR) model. It uses data from first quarter 2000 to fourth quarter 2013. The results of the investigation show that exchange rate fluctuation has a positive and insignificant effect on consumer prices and the increase in consumer prices are mainly due to its own shocks and the increase in money supply in the long run. A stable monetary policy with a low inflationary environment will lessen the pressure of exchange rate changes on consumer prices. So, the Central Bank of Nigeria should be less concern with the inflation impact of exchange rate shocks and focus fully on other objectives such as growth and export competitiveness in designing exchange rate policy.
    VL  - 4
    IS  - 3
    ER  - 

    Copy | Download

  • Sections