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Modelling returns and volatility connectedness between food prices and exchange rate in Nigeria

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  • Lateef O. Akanni

    (Centre for the Study of the Economies of Africa, Abuja, Nigeria Centre for Econometric and Allied Research (CEAR), Department of Economics, University of Ibadan, Ibadan, Nigeria)

Abstract

This study measures the connectedness between food prices and exchange rate in Nigeria using the Diebold and Yilmaz (2012) approach. Using weekly data from January 2012 to January 2019 on five major food prices – rice, maize, millet gari and sorghum, and naira to dollar exchange rate, the study tests for spillovers transmission between food prices and Nigeria domestic currency against the most traded foreign currency - US dollar. The paper finds evidence of interdependence among the food prices and exchange rate based on the obtained spillover indexes. The study further accounts for the 2016 naira to dollar exchange rate crash. The results show that the huge depreciation in the exchange rate have a greater spillover effects on the food prices with this finding is robust to varying lag structure and VAR lag order.

Suggested Citation

  • Lateef O. Akanni, 2019. "Modelling returns and volatility connectedness between food prices and exchange rate in Nigeria," Working Papers 064, Centre for Econometric and Allied Research, University of Ibadan.
    • Handle: RePEc:cui:wpaper:0064
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    More about this item

    Keywords

    Naira exchange rate; Food prices; Spillover analysis; Exchange rate crash;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G01 - Financial Economics - - General - - - Financial Crises
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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