Revisiting the accuracy of inflation forecasts in Nigeria: the oil price –exchange rate perspectives

Elias Udeaja and Kazeem Isah
Additional contact information
Elias Udeaja: Research Department, Central Bank of Nigeria

No 65, Working Papers from Centre for Econometric and Allied Research, University of Ibadan

Abstract: Motivated by the dual characteristic of the Nigeria economy as exporter and importer of oil, we extend the Tule et al. (2018) oil price –based predictive model to include the role of exchange rates in the predictability of inflation in Nigeria. Using the FQGLS estimator developed by Westerlund and Narayan (2012, 2015), we account for endogeneity, persistence and conditional heterosecedatcity effects in the forecasting analyses of inflation in Nigeria. We use both the single and pairwise measures to compare the forecast results of oil prices and/or exchange rates based augmented Phillips curve with the variant that contain them both simultaneously. The result suggests that augmenting the Phillips curve with oil prices and exchange rates in the same model set up is the more accurate to forecasting inflation in Nigeria relative to having them individually in a predictive model. More so, the augmented Phillips curve with oil prices and exchange rate consistently outperforms time series models such as ARMA and ARFIMA. However, we find that accounting for structural breaks will largely improve the accuracy of CMB-APC for forecasting inflation in Nigeria. We find the robustness of these findings evident for in-sample and out-of-sample forecasts.

Keywords: Nigeria; Inflation forecasts; Tule et al. (2018); Phillips curve; Oil price; Exchange rates; Forecast evaluation (search for similar items in EconPapers)
JEL-codes: E31 E37 E53 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2019-04
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://cear.org.ng/index.php?option=com_docman&tas ... ad&gid=110&Itemid=29 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://cear.org.ng/index.php?option=com_docman&task=doc_download&gid=110&Itemid=29 [301 Moved Permanently]--> https://cear.org.ng/index.php?option=com_docman&task=doc_download&gid=110&Itemid=29)

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:cui:wpaper:0065

Access Statistics for this paper

More papers in Working Papers from Centre for Econometric and Allied Research, University of Ibadan Contact information at EDIRC.
Bibliographic data for series maintained by Adeoye Omosebi ( this e-mail address is bad, please contact ).