Contributions of Naira-USD, Naira-Franc and Naira-Yuan exchange rates on inflation and its volatility in Nigeria
Department of Mathematics and Statistics, Federal University Otuoke, Bayelsa State, Nigeria.
Research Article
World Journal of Advanced Research and Reviews, 2023, 23(02), 906-915
Article DOI: 10.30574/wjarr.2024.23.2.2403
Publication history:
Received on 30 June 2024; revised on 08 August 2024; accepted on 10 August 2024
Abstract:
The alarming increase in consumers goods and services with concurrent devaluations of naira have necessitated the need to examine the effects of NUSX(Nigerian naira/1 US dollar), NFX (Nigerian naira/1 France franc) and NCX (Nigerian naira/1 Chinese yuan) rates on inflation(measured by CPI) and its volatility in Nigeria using data sets spanning from 2008 to 2022. The auxiliary autoregressive AAR(3) order of integration test specify that all the variables are stationary at first difference. Adopting multiple regression model with least square method of estimation and generalized autoregressive conditional heteroskedasticity (GARCH(1, 1)) as measure of volatility, the results indicate that NCX (Nigerian naira/1 Chinese yuan), NFX (Nigerian naira/1 France franc) and NUSX(Nigerian naira/1 US dollar) have no influence on both inflation and its volatility in Nigeria. This implies that variation in exchange rates system is not sufficient to explain the sudden increase in the prices of goods and services in Nigeria. Therefore, the government should look beyond exchange rates in finding solution to rising inflation phenomenon in Nigeria’s economic space.
Keywords:
Exchange rates; Inflation; GARCH model; Volatility
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