Oil price and exchange rate nexus in Nigeria: are there asymmetries?

Attahir B. Abubakar

Oil price and exchange rate nexus in Nigeria: are there asymmetries?

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Abstract

This paper examines the dynamics in the relationship between oil price and exchange rate in Nigeria by utilizing monthly data spanning January 1986 to June 2018. It speciﬁcally determines asymmetries in the relationship between oil price and exchange rate and the eﬀect of oil price shocks on exchange rate. Threshold Autoregressive (TAR), Momentum Threshold Autoregressive (MTAR) and Structural Vector Autoregressive (SVAR) models were employed for the analysis. Findings of TAR and MTAR models conﬁrm the absence of asymmetric cointegration, hence leading to the conclusion that in the case of Nigeria, there are no asymmetries in the relationship between oil price and exchange rate. Findings from the SVAR model show gradual appreciation (though with some time lag) of naira following positive shocks to oil price. The study recommends among others the need for diversiﬁcation of foreign exchange earnings base of the economy, so as to minimise the eﬀect of negative shocks to oil price.

Original language	English
Article number	1
Journal	CBN Journal of Applied Statistics
Volume	10
Issue number	1
Publication status	Published - 30 Sept 2019
Externally published	Yes

Keywords

asymmetric
exchange rate
MTAR
Nigeria
oil price
SVAR
TAR

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2019 08 07 Abubakar Oil finalFinal published version, 1.52 MB

https://dc.cbn.gov.ng/jas/vol10/iss1/1/

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title = "Oil price and exchange rate nexus in Nigeria: are there asymmetries?",

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KW - SVAR

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Oil price and exchange rate nexus in Nigeria: are there asymmetries?

Abstract

Keywords

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