Revisiting the accuracy of inflation forecasts in Nigeria: The oil price–exchange rate–asymmetry perspectives
Kazeem Isah,
Abdulkader C. Mahomedy,
Elias A. Udeaja,
Ojo Adelakun (),
Yusuf Yakubu and
Danmecca Musa
South African Journal of Economics, 2022, vol. 90, issue 3, 329-348
Abstract:
Motivated by the distinctive paradoxical nature of the Nigerian economy as the only OPEC oil‐exporting economy that yet depends heavily on the importation of gasoline, we are compelled to re‐examine the accuracy of the oil‐based augmented Philips curve model in the predictability of inflation. Using quarterly data from 1970 to 2020, we investigate whether extending the oil price‐based augmented Phillips curve to include exchange rate improves the accuracy of inflation forecast in Nigeria. We rely on the outcomes of our preliminary analysis to account for the presence of endogeneity, persistence and conditional heteroscedasticity in the predictability of inflation following the Westerlund and Narayan (2015) procedure. We find the extended variant of the oil price‐based Phillips curve model that includes the exchange rate pass‐through as most accurate for improving inflation forecasts in Nigeria. Given the robustness of our results from several models, we conclude that the exchange rate channel through which shocks to the oil price transmit into the economy is essential for enhancing the accuracy of inflation forecasts.
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://doi.org/10.1111/saje.12313
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:bla:sajeco:v:90:y:2022:i:3:p:329-348
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0038-2280
Access Statistics for this article
South African Journal of Economics is currently edited by Philip A. Black
More articles in South African Journal of Economics from Economic Society of South Africa Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().