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The Role of Oil Prices and Real Exchange Rate on the Output Growth in Nigeria

R. Alimi () and Bayo Fatukasi

International Journal of Financial Economics, 2014, vol. 3, issue 2, 70-79

Abstract: This study empirically examines the impact of oil price and exchange rate on Nigerian economy. Data spanning over the period of 1970 to 2012 was used and we applied the stationary tests, vector autoregressive model and the impulse-response function analysis. The results of the unit root tests shows that all the series are integrated of order one and results obtained from the impulse response functions (IRF) and variance decompositions (VDCs) for country shows that oil price has a significant impact on real output in Nigerian economy. We found also, that the effect of a one standard deviation shock in the oil price to GDP shows that economic growth will decline. Finally, we found the effect of real exchange rate on growth to be positive but marginal. Therefore, policy makers should endeavor to avoid policy that triggers fluctuations in oil prices and exchange rate.

Date: 2014
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