Oil Price Fluctuation And Exchange Rate In Nigeria: Is There A Volatility Transmission Effect

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Umunna Nwagu
Charles Edeh
Henry Onoriode

Abstract

Over the period 1980-2022, we examined the transmission effect of oil prices on Nigeria's exchange rate. E-GARCH (Exponential GARCH) model is employed in this study. We used Augmented Dickey Fuller to determine a unit root, integrating exchange rates, crude oil prices, external reserves, GDP, inflation, and interest rates to one I(1) and zero I(0). We used Johansen Co-integration to determine long-term relationships. Interest rates, inflation, and crude oil prices all correlated positively with each other. A statistically insignificant result is shown by the variance equation, indicating there is no correlation between crude oil prices and exchange rates. The Nigerian exchange rate is not affected by volatility transmission or leverage due to fluctuations in crude oil prices. According to the study, governments should take monetary policy measures to stabilize exchange rates during unpredictable oil price fluctuations. It is necessary to adjust the naira exchange rate when oil prices fluctuate.

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How to Cite
Nwagu, U., Edeh, C. C., & Onoriode, H. (2023). Oil Price Fluctuation And Exchange Rate In Nigeria: Is There A Volatility Transmission Effect. Journal of Advanced Research in Economics and Administrative Sciences, 4(4), 48-59. https://doi.org/10.47631/jareas.v4i4.640
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