Citations


Contact Us

For Marketing, Sales and Subscriptions Inquiries
2637 E Atlantic Blvd #43110
Pompano Beach, FL 33062
USA

Conference List

The Economics and Finance Letters

March 2016, Volume 3, 3, pp 30-38

The Effect of Exchange Rate Changes on Consumer Prices in Nigeria: Evidence from VECM Model

Babagana Mala MUSTI

Babagana Mala MUSTI 1

  1. Faculty of Social and Management Sciences, Yobe State University, Damaturu, Nigeria 1

on Google Scholar
on PubMed

Pages: 30-38

DOI: 10.18488/journal.29/2016.3.3/29.3.30.38

Share :


Abstract:

The continuous adoption of trade openness policies and floating exchange rates regime by developing countries exposed them to speculative pressures. It makes exchange rate shocks easily transferred to domestic consumer prices. That makes tremendous impacts on the domestic consumer price inflation.  This paper thus examines the response of domestic consumer prices to exchange rate changes otherwise known as ‘Exchange rate pass-through’. The paper uses vector error correction (VECM) model to examine the relationship. A quarterly time series data for a period ranging from 1986Q1 to 2013Q4 for Nigeria was used. The study found a substantial but incomplete and slow pass-through of exchange rate changes to domestic prices.

Contribution/ Originality
This study contributes in the existing literature by estimating the ERPT using Nigerian data as there are very few studies on ERPT for developing countries and particularly Nigeria. This study uses VECM model against the SVAR model used by other studies.

Keywords:

Exchange rate pass-through, Consumer price, Inflation, Vector error correction.

Video:

Reference:

  1. Aliyu, S.U.R., M.U. Yakub, G.K. Sanni and O.O. Duke, 2010. Exchange rate pass-through in Nigeria: Evidence from a vector error correction model. Paper Presented at the Annual Conference of Center for the Study of African Economies CSAE,  Oxford, 21 March. Retrieved from http://www.csae.ox.ac.uk/conferences/2010-edia/papers/012-Aliyu.pdf.
  2. An, L., 2006. Three essays on exchange rate and monetary policy, University of Kentucky, Lexington. (Doctoral Dissertation). Retrieved from http://uknowledge.uky.edu/cgi/viewcontent.cgi?article=1494&context=gradschool_diss.
  3. Aron, J., R. Macdonald and J. Muellbauera, 2014. Exchange rate pass-through in developing and emerging markets: A survey of conceptual, methodological and policy issues, and selected empirical findings. Journal of Development Studies, 50(1): 101-143.
  4. Aziz, M.N., N. Horsewood and S. Sen, 2014. The first and second stage pass-through of exchange rates: A developing country perspective. Review of development Economics, 18(3): 595-609.
  5. Bhattacharya, R., I. Patnaik and A. Shah, 2011. Monetary policy transmission in an emerging market setting. IMF Working Paper No. 5.
  6. Devereux, M.B. and C. Engel, 2002. Exchange rate pass-through, exchange rate volatility, and exchange rate disconnect. Journal of Monetary Economics, 49: 913-940.
  7. Devereux, M.B. and J. Yetman, 2008. Price adjustment and exchange rate pass through. Journal of International Money and Finance, 29(1): 181–200.
  8. Dornbusch, R., 1987. Exchange rates and prices. American Economic Review, 77(1): 93-106.
  9. Goldberg, P.K. and M.M. Knetter, 1997. Goods prices and exchange rates: What have we learned? Journal of Economic Literature, 35(3): 1243-1272.
  10. Hufner, F.P. and M. Schroder, 2002. Exchange rate pass-through to consumer prices: A European perspective. Discussion Paper No. 02-20, ZEW Centre for European Economic Research.
  11. Ito, T. and K. Sato, 2006. Exchange rate changes and inflation in post-crisis Asian economies: VAR analysis of the exchange rate pass-through. Research Institute of Economy, Trade and Industry Discussion Paper Series No. 018.
  12. Kara, A. and E. Nelson, 2002. The exchange rate and inflation in the UK’ Bank of England External MPC Unit Discussion Paper No. 11.
  13. Kiptui, M., D. Ndolo and S. Kaminchia, 2005. Exchange rate pass-through: To what extent do exchange rate fluctuations affect import prices and inflation in Kenya? Central Bank of Kenya. Working Papers No. 1.
  14. Mann, C.L., 1986. Prices, profit margins, and exchange rates. Federal Reserve Bulletin, 72(6): 366-379.
  15. Masten, I., F. Coricelli and Jazbec, 2003. Exchange rate pass-through in candidate countries. Centre for economic policy research, Discussion paper, DP 3894. Retrieved from http://cepr.org/active/publications/discussion_papers/dp.php?dpno=3894.
  16. McCarthy, J., 2000. Pass-through of exchange rates and import prices to domestic inflation in some industrialized economies. Federal Reserve Bank of New York Staff Reports No.11.
  17. Menon, J., 1995. Exchange rate pass-through. Journal of Economic Surveys, 9(2): 197-231.
  18. Rowland, P., 2003. Exchange rate pass-through to domestic prices: The case of Colombia. Banco de la Republica Working Papers, No. 001635.
  19. Sanusi, A.R., 2010. Exchange rate pass-through to consumer prices in Ghana: Evidence from structural vector auto regression. West African Journal of Monetary and Economic Integration, 10(1): 24 -54.
  20. Taylor, J.B., 2000. Low inflation, pass-through, and the pricing power of firms. European Economic Review, 44(7): 1389-1408.
  21. Yang, J.W., 1997. Exchange rate pass-through in U.S. manufacturing industries. Review of Economics and Statistics, 79(1): 95-104.
  22. Zubair, A., G. Okorie and A.R. Sanusi, 2013. Exchange rate pass-through to domestic prices in Nigeria: An empirical investigation. Central Bank of Nigeria, Economic and Financial Review, 51(1): 1-32.

Statistics:

Google Scholor ideas Microsoft Academic Search bing Google Scholor

Funding:

This study received no specific financial support.

Competing Interests:

The author declares that there are no conflicts of interests regarding the publication of this paper.

Acknowledgement:


Related Article

( 1 ) Relationships Between Leadership Roles and Project Team Effectiveness as Perceived by Project Managers in Malaysia
( 2 ) Relationships among Team Trust, Team Cohesion, Team Satisfaction and Project Team Effectiveness as Perceived by Project Managers in Malaysia
( 3 ) The Effects of Exchange Rate Liberalization in Kenya on French Beans Exports
( 4 ) Does the Mena Countries May Converge in GDP to Southern European One? The Effects of International Trade
( 5 ) Can the Interdependence Effect and the Contagion Phenomena be Related with One Another?
( 6 ) Corruption’s and Democracy’s Effects on Economic Growth
( 7 ) Effective Tax Administration and Institutionalization of Accounting Systems in Small and Medium Scale Enterprises: Evidence from Nigeria
( 8 ) Moderating Effect of Demographics on Monetary Motivation and Employees Job Performance Relationship: Evidence from Malaysia
( 9 ) Consideration the Effects of Water Sector Investment on Economic Growth in Iran
( 10 ) Influence Internship Learning Effect in Business Service Sector: Using Internship Self-Efficacy as the Mediator Variable
( 11 ) The Effect of Selected Financial Ratios on Profitability: An Empirical Analysis of Listed Firms of Cement Sector in Saudi Arabia
( 12 ) An Empirical Test on Effect of Intra-Product Trade on Regional Income Distribution: The Case of Liaoning, China
( 13 ) Effects of Advertising on Consumer Behavior in Low Density Houses: The Case of Marlborough, Zimbabwe
( 14 ) Moderating Effects of Project Management Experience, Project Team Size, Project Duration and Project Value Size on the Relationship between Project Manager’s Leadership Roles and Project Team Effectiveness in Malaysia
( 15 ) The Effects of Changes in Accounting Standards on Value Relevance of Financial Statement Information of Malaysia and Nigeria Banks
( 16 ) The Effect of Outsourcing on Anglogold Ashanti Obuasi Mines Performance
( 17 ) Organisational Politics – Causes and Effects on Organisation and Employees
( 18 ) The Mediating Effect of Market Orientation on the Relationship between Entrepreneurial Orientation Dimensions and Organizational Performance: A Study on Banks in Libya
( 19 ) Confirming the Mediation Effect of A Structural Model By Using Bootstrap Approach: A Case Study of Malaysian 8th Grade Students’ Mathematics Achievement
( 20 ) Land Use/Land Cover Change and its Effects on Bamboo Forest in Benishangul Gumuz Region, Ethiopia
( 21 ) Emotional Workgroup Performance and Group Effectiveness Egyptian Context
( 22 ) The Effect of Public Debt on Domestic Product and Unemployment (An Empirical Study on the Palestinian Economy)
( 23 ) The Effect of Exchange Rate Changes on Consumer Prices in Nigeria: Evidence from VECM Model
( 24 ) The Effect of Access and Quality of Education on Economic Development in Botswana
( 25 ) Effect of Media Transportation and Advertising Transportation on Customers Responsiveness
( 26 ) The Effect of Personal Factors on the Customer Rating of the Quality of Services of the Islamic Banks Operating in the Syrian Coast
( 27 ) Does the Holiday Effect Differ from Religious to Non-Religious Holidays? Empirical Evidence from Egypt
( 28 ) Effects of Environmental Satisfaction on Family Displacement Case Study: Gohar Dasht Region, Karaj City
( 29 ) Effect of Budget Defict on Private Investment in East African Community for the Period 1981-2015: A Panel Data Analysis
( 30 ) Comparative Analysis of the Effectiveness of Coub-Douglas, Real Business Cycle, and Keynsian Growth Models in Determining Economic Growth in Nigeria
( 31 ) Effects of Corporate Social Responsibility on Banks Financial Performance in Nigeria: A Study of United Bank of Africa
( 32 ) The Effects of Exchange Rate Variability on Trade Flows in Nigeria: A Cointegration Analysis
( 33 ) The Effect of Work-Life Balance on Accounting Ethics
( 34 ) The Moderating Effect of Governance Mechanisms on the Relationship Between Innovation Strategy and the Performance
( 35 ) Effect of Institutional Factors on Foreign Direct Investment in Nigeria
( 36 ) An Evaluation of Effectiveness of Oversight Committees: A Case of City of Johannesburg, Section 79 Committees
( 37 ) The Effect of Internal and External Factors of Companies on Profitability and its Implications on Stock Price Index of State-Owned Banks
( 38 ) Africa's Human Capital Development: Is Public Finance Management an Effective Strategy?
( 39 ) Analysis of the Effects of Pull and Push Factors on Brain Drain: An Example of Turkey
( 40 ) The Effect of Selected Factors on Tax Revenue Mobilization in Ethiopia: The Case of Amhara Region
( 41 ) The Mediating Effect of Financial Self-Efficacy on the Financial Literacy-Behavior Relationship: A Case of Generation Y Professionals
( 42 ) Study on the Effect of Foreign Investment on Anhuis Industrial Structure Optimization
( 43 ) Activity Cost Management and its Effect on Enterprise Productivity
( 44 ) Effects of Socio-Cultural Diversity on the Performance of Private Health Care Organizations in Kogi State
( 45 ) Analysis of Effect of Profitability, Capital, Risk Financing, the Sharia Supervisory Board and Capabilities Zakat in Islamic Perspective with Circular Approach Causastion on Islamic Banks in Indonesia
( 46 ) The Effect of Corporate Social Responsibility Disclosure on Corporate Financial Performance
( 47 ) Issues of Unemployment in Nigeria: Effect of Real Exchange Rate and Inflation Interaction
( 48 ) Testing the Random Walks in Korea Stock Exchange
( 50 ) Exchange Rate Movements, Import And Economic Growth in Nigeria (1986-2010)
( 51 ) Impact of Food Beverage Price Index and Exchange Rate Volatility on Economic Growth
( 52 ) Testing the Random Walk: The Case of Hong Kong Stock Exchange
( 53 ) Role of Foreign Investment and External Debt in Determination of Exchange Rate
( 54 ) The Impact of the Global Financial Crisis on the Debt, Liquidity, Growth, and Volume of Companies in Palestine Stock Exchange
( 55 ) Studying the Integration of Damascus Securities Exchange with Selected Stock Markets
( 57 ) Dynamics of Inflation, Economic Growth, Money Supply and Exchange Rate in India: Evidence from Multivariate Analysis
( 58 ) Implications of Crude Oil Price Volatility and Parallel Exchange Rate Fluctuation on the Cost of Living in Nigeria
( 59 ) Relevance of Stakeholders Theory, Organizational Identity Theory and Social Exchange Theory to Corporate Social Responsibility and Employees Performance in the Commercial Banks in Nigeria
( 61 ) The Profitability of Momentum Strategies: Empirical Evidence from Damascus Securities Exchange (DSE)
( 62 ) Exchange Rate and Foreign Reserves Interface: Empirical Evidence from Nigeria
( 63 ) Impact of Exchange Rate Fluctuation on Selected Economic Sectors of the Nigerian Economy
( 64 ) The Colonialists & Indigenous Exchange Currency: Tracing the Genesis of Socioeconomic Woes in Postcolonial Nigeria
( 65 ) The Transitional Relationship between Economic Growth and Exchange Rate in Ghana: An Empirical Approach
( 66 ) Determinants of Exchange Rate in Nigeria: A Comparison of the Official and Parallel Market Rates
( 67 ) Exchange Rate Pass-through to Prices: VAR Evidence for Albania
( 69 ) Exchange Rate Volatility, Foreign Exchange Market Intervention and Asymmetric Preferences
( 70 ) Importance of Corporate Governance Quality and Voluntary Disclosures of Corporate Governance Information in Listed Malaysian Family Controlled Businesses
( 71 ) Strategic Evaluation of Distributed Power Generation Technology: A Sustainable Approach
( 75 ) Rate of Return Would Not Increase To the Extent of Annuity Saving Discount
( 76 ) The Association Between Corporate Risk Disclosure and Firm Performance in Emerging Country – The Case of Egypt
( 77 ) A Model of Strategic Thinking: Islamic and Iranian Perspective
( 78 ) Promoting Local Acceptability of International Oil Companies (IOCS) Through Corporate Social Responsibility (CSR): The Case of Tullow Oil in Ghana
( 79 ) Challenges and Survival Strategies for Women in Small Scale Catering Business: A Case Study of Siyaso Magaba, Mbare
( 80 ) Attributes Influencing Strategic Alignment in the Service Sector: An Indonesian Banking Sector Case Study
( 82 ) The Role of Strategic Planning on the Management of Organizational Change
( 83 ) Development, Preference Change, and Inequality in an Integrated Walrasian-General-Equilibrium and Neoclassical-Growth Theory
( 84 ) Managerial Judgement Versus Financial Techniques in Strategic Investment Decisions: An Empirical Study on the Syrian Coastal Region Firms
( 85 ) Corporate Funding and Sustainability of Non- Governmental Organizations in Africa
( 89 ) Financial Deepening, Interest Rate Spread and Economic Growth: New Evidence from Sub-Sahara Africa
( 90 ) Implications of Accountants Unethical Behavior and Corporate Failures
( 96 ) Public-Private Partnership as a Strategy for E-Governance Funding in Africa: The Gains and the Pains
( 97 ) Does Gold Price Lead or Lags Islamic Stock Market and Strategy Commodity Price? A Study from Malaysia
( 99 ) Profitability of Commercial Bank on Interest Rate Deregulation
( 101 ) Migration as a Livelihood Strategy: The Case of Internal Migration in Ghana
( 102 ) Correlation between Financial Difficulties and Financing Strategies among Market Stallholders in Batangas City
( 105 ) Determinants of Corporate Tax Avoidance Strategies among Multinational Corporations in Malaysia
( 109 ) Growing and Building: Collaboration of Urban Poverty Reduction Strategy
( 113 ) A Review upon the Changes Which Come With the Model upon Turkish Metropolitan Municipality within the Provincial Administrative Boundaries
( 115 ) Regime Changes in the Volatility of Stock Markets
( 116 ) A Multidimensional Structure of Shopping Centre Visit Objectives - An European Consumers Perspective
( 117 ) Green Products Purchasing Among Malaysian Consumers
( 118 ) Awareness and Perception of Muslim Consumers on Halal Cosmetics and Personal Care Products
( 120 ) An Assessment of the Relationship between Budget Deficit Syndrome and Consumer Welfare in Nigeria (1985 – 2014)
( 122 ) Consumers’ Behavioural Intention to Adopt Mobile Banking in Rural Sub-Saharan Africa Using an Extension of Technology Acceptance Model: Lessons from Zimbabwe
( 123 ) The Impact of the Decline in Oil Prices in Latin America
( 125 ) Forecasting Prices of Three Important Agricultural Crops in Bangladesh
( 126 ) Exploring the Asymmetric Linkage between Commodity Prices and Fiscal Performance in Nigeria
( 128 ) The Impact of Investment Climate Reforms on the Development of Small and Medium Sized Enterprises in Nigeria: A Policy Brief
( 129 ) Public Infrastructure Spending and Economic Growth in Nigeria: An Error Correction Mechanism (ECM) Approach
( 130 ) Anti-Corruption Crusade in Nigeria: More Words Than Deeds
( 131 ) Social Security; A Public Policy for Good Governance in Nigeria: The Role of Nigerian Legislature
( 132 ) The Impact of Rice Production, Consumption and Importation in Nigeria: The Political Economy Perspectives
( 133 ) Good Governance, Rural Development and Poverty Alleviation in Nigeria: Issues and Challenges
( 134 ) Structural Breaks and the Long-Run Stability of Demand for Real Broad Money Function in Nigeria: A Gregory-Hansen Approach
( 136 ) National Security and Democratization in Nigeria: The Case of Insurgence
( 139 ) Social Protection Programmes, Agricultural Production and Youth Employment in Nigeria: Analysis from LSMS-ISA