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Time-Gap effects of crude oil prices on the foreign exchange rates: Evidence from Nigeria

Author

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  • Nenubari Ikue John

    (Department of Economics, Faculty of Social Sciences, University of Port Harcourt, Nigeria)

  • Emeka Nkoro

    (Department of Economics, Faculty of Social Sciences, University of Port Harcourt, Nigeria)

  • Jeremiah Anietie

    (Emerald Energy Institute, University of Port Harcourt, Nigeria)

Abstract

There is a pool of techniques and methods in addressing dynamics behaviors in higher frequency data, prominent among them is the ARCH/GARCH techniques. In this paper, the various types and assumptions of the ARCH/GARCH models were tried in examining the dynamism of exchange rate and international crude oil prices in Nigeria. And it was observed that the Nigerian foreign exchange rates behaviors did not conform with the assumptions of the ARCH/GARCH models, hence this paper adopted Lag Variables Autoregressive (LVAR) techniques originally developed by Agung and Heij multiplier to examine the dynamic response of the Nigerian foreign exchange rates to crude oil prices. The Heij coefficient was used to calculate the dynamic multipliers while the Engel & Granger two-step technique was used for cointegration analysis. The results revealed an insignificant dynamic long-term response of the exchange rate to crude oil prices within the periods under review. The coefficient of dynamism was insignificantly in most cases of the sub-periods. The paper equally revealed that the significance of the dynamic multipliers depends greatly on external information about both market indicators which are two-way interactions. Thus, the paper recommends periodic intervention in the foreign exchange market by the monetary authorities to stabilize the market against any shocks in the international crude oil market, since crude oil is the main source of foreign exchange in Nigeria.

Suggested Citation

  • Nenubari Ikue John & Emeka Nkoro & Jeremiah Anietie, 2021. "Time-Gap effects of crude oil prices on the foreign exchange rates: Evidence from Nigeria," Bussecon Review of Social Sciences (2687-2285), Bussecon International Academy, vol. 3(3), pages 31-44, July.
    • Handle: RePEc:adi:bsrsss:v:3:y:2021:i:3:p:31-44
    DOI: 10.36096/brss.v3i3.296
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    References listed on IDEAS

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