Trans-Atlantic Transmission of Inflation Rate Shocks: Any Macroeconomic Concern for Nigeria?

Anthony O. Agu, Kingsley Chidera Adonike, Innocent Ifeanacho Egbunike and Timothy Ogbemudiare Ideh
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Anthony O. Agu: Department of Economics, Chukwuemeka Odumegwu Ojukwu University, Igbariam, Anambra State
Kingsley Chidera Adonike: Department of Economics, Chukwuemeka Odumegwu Ojukwu University, Igbariam, Anambra State
Innocent Ifeanacho Egbunike: Department of Economics, Chukwuemeka Odumegwu Ojukwu University, Igbariam, Anambra State
Timothy Ogbemudiare Ideh: Department of Economics, Dennis Osadebe University, Asaba, Delta State, Nigeria

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 11, 743-755

Abstract: The great convergence of global economies has led to undue uncertainties in several domestic economies. In the era of globalization, macroeconomic policies applied in one country can have a trans-boarder effect on other countries, either positively or negatively. As a result, this research paper focuses on examining the transmission of inflation rate shocks from the trans-Atlantic regions and its potential macroeconomic implications in Nigeria. The study utilizes annual time series data from the World Bank’s Development Indicators for the year 2023. To achieve the objectives of this investigation, several econometric tests were conducted on the relevant variables. These tests include the Augmented Dickey-Fuller (ADF) test, Philip Peron Test, Johansen Cointegration test, variance decomposition test, and impulse response test. Each of these tests serves a specific purpose in analyzing the relationship between the policy variables and their impact on Nigerian economy. The impulse response analysis of our VAR model shows that Nigerian variables respond significantly to shocks from foreign variables. The study therefore concluded that macroeconomic shocks in Nigeria are mostly from across the Atlantic. In line with this, the study recommended that the Central Bank of Nigeria (CBN) should be cautious of both domestic developments and movements in the US prices in order to assess the potential risks of inflation.

Date: 2024
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