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Revisiting Exchange Rate Pass-Through to Consumer Price Inflation in Nigeria: A Cointegrated Vector Autoregressive Approach

Ojonugwa Usman () and Muhammad Sani Musa ()

Academic Journal of Economic Studies, 2018, vol. 4, issue 1, 60-67

Abstract: This study revisits the extent of Exchange Rate Pass-Through (ERPT) in Nigeria based on a Cointegrated Autoregressive Model proposed by Johansen (1988, 1995). Using the annual data from 1960 to 2015, it is found that exchange rate has a positive and significant effect on consumer price inflation, captured by CPI both in the short- and long-run dynamics. The findings also show that import price index and trade openness index have positive and significant effects on consumer price inflation; although the effect of import price index is statistically flawed in the short-run. The implication of this study, therefore, is that exchange rate, import price index and trade openness index are the major determinants of consumer price inflation in the long-run but in the short-run the effect of import price index is blunted.

Keywords: Exchange Rate Pass-Through; Consumer Price Index; Cointegrated Autoregressive Model; Nigeria (search for similar items in EconPapers)
JEL-codes: E31 F31 F42 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:khe:scajes:v:4:y:2018:i:1:p:60-67