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Inflation, output growth and their uncertainties: some multivariate GARCH-M evidence for Nigeria

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  • Perekunah B. Eregha

    (Pan-Atlantic University)

  • Arcade Ndoricimpa

    (University of Burundi)

Abstract

The study applies a BEKK GARCH-M model to examine the effect of uncertainty on the levels of inflation and output growth in Nigeria. The results suggest a significant positive effect of inflation uncertainty on the level of inflation, supporting the Cukierman and Meltzer (Econometrica 54(5):1099–1128, 1987) hypothesis. In addition, uncertainty about inflation is found to be detrimental to output growth, supporting the Friedman’s (J Political Econ 85(3):451–472, 1977) hypothesis as it connotes greater risk to investment. Uncertainty about growth does not have a significant effect on both the levels of inflation and output growth. The evidence suggests the need to minimize inflation uncertainty to avoid its adverse effects on the economy by treating positive oil price shocks as temporal. In addition, the need to build domestic buffers through structural reforms to diversify the economy cannot be overemphasized in Nigeria.

Suggested Citation

  • Perekunah B. Eregha & Arcade Ndoricimpa, 2022. "Inflation, output growth and their uncertainties: some multivariate GARCH-M evidence for Nigeria," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 24(1), pages 197-210, June.
    • Handle: RePEc:spr:jsecdv:v:24:y:2022:i:1:d:10.1007_s40847-022-00177-1
    DOI: 10.1007/s40847-022-00177-1
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    More about this item

    Keywords

    Inflation; Inflation uncertainty; Output; Output uncertainty; BEKK GARCH-M;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E0 - Macroeconomics and Monetary Economics - - General

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