The asymmetric effect of exchange rate pass-through to domestic prices: Evidence from Nigeria
The linear relationship between exchange rates and domestic prices has been extensively researched but little is known about their asymmetric relationship, particularly in Nigeria. This study examined nominal exchange rate passthrough to domestic prices using the official and parallel marke...
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| Format: | Article |
| Language: | English |
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Faculty of Economics, Belgrade
2024-01-01
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| Series: | Ekonomski Anali |
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| Online Access: | https://doiserbia.nb.rs/img/doi/0013-3264/2024/0013-32642443117A.pdf |
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| author | Aminu Alarudeen Afolabi Joshua Adeyemi |
| author_facet | Aminu Alarudeen Afolabi Joshua Adeyemi |
| author_sort | Aminu Alarudeen |
| collection | DOAJ |
| description | The linear relationship between exchange rates and domestic prices has been
extensively researched but little is known about their asymmetric
relationship, particularly in Nigeria. This study examined nominal exchange
rate passthrough to domestic prices using the official and parallel market
exchange rates. The non-linear autoregressive distributed lag (NARDL)
estimation technique was adopted to analyse data of relevant variables from
2011M1 to 2021M3. The results showed that the parallel market exchange rate,
not the official exchange rate, is the driver of domestic prices in Nigeria
due to the huge discrepancies in the two rates, which economic agents
exploit to their advantage. The Wald test results confirmed the existence of
short-run asymmetry between parallel market exchange rates and domestic
prices in Nigeria. This suggests the need for the Nigerian monetary
authorities to close the gap between the official and parallel market
exchange rates to minimise arbitrage. |
| format | Article |
| id | doaj-art-d3e1611101eb45d0bc7927ea65115b19 |
| institution | Kabale University |
| issn | 0013-3264 1820-7375 |
| language | English |
| publishDate | 2024-01-01 |
| publisher | Faculty of Economics, Belgrade |
| record_format | Article |
| series | Ekonomski Anali |
| spelling | doaj-art-d3e1611101eb45d0bc7927ea65115b192025-01-30T06:44:59ZengFaculty of Economics, BelgradeEkonomski Anali0013-32641820-73752024-01-016924311714110.2298/EKA2443117A0013-32642443117AThe asymmetric effect of exchange rate pass-through to domestic prices: Evidence from NigeriaAminu Alarudeen0https://orcid.org/0000-0002-9808-3398Afolabi Joshua Adeyemi1https://orcid.org/0000-0003-2024-3942Department of Economics, Faculty of Economics and Management Sciences, University of Ibadan, Ibadan, NigeriaInnovation and Technology Policy Department, Nigerian Institute of Social and Economic Research, Ibadan, NigeriaThe linear relationship between exchange rates and domestic prices has been extensively researched but little is known about their asymmetric relationship, particularly in Nigeria. This study examined nominal exchange rate passthrough to domestic prices using the official and parallel market exchange rates. The non-linear autoregressive distributed lag (NARDL) estimation technique was adopted to analyse data of relevant variables from 2011M1 to 2021M3. The results showed that the parallel market exchange rate, not the official exchange rate, is the driver of domestic prices in Nigeria due to the huge discrepancies in the two rates, which economic agents exploit to their advantage. The Wald test results confirmed the existence of short-run asymmetry between parallel market exchange rates and domestic prices in Nigeria. This suggests the need for the Nigerian monetary authorities to close the gap between the official and parallel market exchange rates to minimise arbitrage.https://doiserbia.nb.rs/img/doi/0013-3264/2024/0013-32642443117A.pdfexchange rate passthroughdomestic pricescentral bank of nigeriaparallel marketnon-linear autoregressive distributed lag |
| spellingShingle | Aminu Alarudeen Afolabi Joshua Adeyemi The asymmetric effect of exchange rate pass-through to domestic prices: Evidence from Nigeria Ekonomski Anali exchange rate passthrough domestic prices central bank of nigeria parallel market non-linear autoregressive distributed lag |
| title | The asymmetric effect of exchange rate pass-through to domestic prices: Evidence from Nigeria |
| title_full | The asymmetric effect of exchange rate pass-through to domestic prices: Evidence from Nigeria |
| title_fullStr | The asymmetric effect of exchange rate pass-through to domestic prices: Evidence from Nigeria |
| title_full_unstemmed | The asymmetric effect of exchange rate pass-through to domestic prices: Evidence from Nigeria |
| title_short | The asymmetric effect of exchange rate pass-through to domestic prices: Evidence from Nigeria |
| title_sort | asymmetric effect of exchange rate pass through to domestic prices evidence from nigeria |
| topic | exchange rate passthrough domestic prices central bank of nigeria parallel market non-linear autoregressive distributed lag |
| url | https://doiserbia.nb.rs/img/doi/0013-3264/2024/0013-32642443117A.pdf |
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