Impact of Exchange Rate Volatility on Inflation in Nigeria

Nuhu Musa ()

Journal of Contemporary Research in Business, Economics and Finance, 2021, vol. 3, issue 1, 26-38

Abstract: This study examined the effect of exchange rate volatility on inflation in Nigeria using annual time series data covering the period 1986-2019. To achieve this objective, the study employed the generalized autoregressive conditional heteroskedasticity (GARCH) and vector error correction model (VECM) to ascertain the long-run impact of exchange rate volatility on inflation . The study used consumer price index as a proxy for inflation being the dependent variable while nominal exchange rate (NER), money supply (MS) import (IMP) and export (EPT) were used as the independent variables. The results of stationarity test indicated that the variables have mixed order of integration and bounds test for co-integration confirmed the existence of a long-run relationship among the variables. Findings showed that money supply (MS) and nominal exchange rate(NER) had positive and significant effect on consumer price index, meaning that inflation in Nigeria is caused by exchange rate fluctuations as well as increase in money supply. Based on the findings, the study recommended that growth of money supply should be controlled by the central bank in order to reduce inflation to the barest minimum.

Keywords: Exchange rate; Volatility; Money supply; Inflation; VECM; Consumer price index. (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://learning-gate.com/index.php/2641-0265/article/view/99/55 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ajp:jcrbef:v:3:y:2021:i:1:p:26-38:id:99

Access Statistics for this article

More articles in Journal of Contemporary Research in Business, Economics and Finance from Learning Gate
Bibliographic data for series maintained by Michael Laurence ().