Crude oil price‎, ‎consumer price index and exchange rate nexus‎: Evidence from dynamic vector autoregressive model

Document Type : Original Scientific Paper

Authors

Department of Statistics‎, ‎University of Abuja‎, ‎Abuja‎, ‎Nigeria

Abstract

This study offers an assessment of the dynamic relationship between crude oil price‎, ‎the consumer price index‎, ‎and the exchange rate in Nigeria‎. ‎The data used for this study were secondary data sourced from the Central Bank of Nigeria's statistical bulletin and the National Bureau of Statistics annual report‎. ‎Optimum selection criteria‎, ‎such as the Akaike information criterion‎, ‎optimal lag length‎, ‎and the vector autoregressive model approach‎, ‎were utilized to capture the dynamic behavior of the endogenous variables‎. ‎The results indicated that the coefficients of determination for crude oil prices‎, ‎the consumer price index‎, ‎and the exchange rate were 73.3%‎, ‎72.2%‎, ‎and 81.3%‎, ‎respectively‎, ‎indicating the proportion of total variation explained by the variables of interest‎. ‎The pairwise Granger causality tests revealed that the price of crude oil Granger-causes both the consumer price index and the exchange rate‎. ‎The vector autoregressive estimation model found that crude oil prices had an insignificant positive relationship with the first lag of the consumer price index‎, ‎and an insignificant negative relationship with the second lag‎. ‎The results also indicated a significantly positive relationship between crude oil prices and both the first and second lags of the exchange rate‎. ‎Additionally‎, ‎the consumer price index exhibited a positive and significant relationship with both the first and second lags of the exchange rate‎. ‎The study recommends the use of the vector autoregressive model to assess the dynamic relationship between crude oil prices‎, ‎consumer price index‎, ‎and exchange rate in Nigeria.

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Main Subjects

Journal of Statistical Modelling: Theory and Applications
Volume 5, Issue 2
July 2024
Pages 175-196

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History

  • Receive Date: 18 February 2025
  • Revise Date: 30 May 2025
  • Accept Date: 28 July 2025

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