This study examines the time series properties of co-integration and causal relationship between oil (non-agricultural) and non-oil (agricultural) import and export in Africa's largest economy. We employed Granger causality and Johansen and Juselius's co-integration methods to investigate causal relationships among the variables Naira-US dollars exchange rate (USD), Naira-Pounds exchange rates (GBP), Oil Import (OI), Non-Oil import (NO), Oil Export (OE) and Non-Oil export (NE). We found empirical evidence for co-integration between oil and non-oil import. Our result reveals the existence of long run equilibrium between exchange rates, oil import and export, and non-oil import (agriculture) and export. Non-oil import and export involves those of agricultural products like Cocoa, Timber, Cassava and Groundnut. We show that there is bidirectional Granger causality from import and export of both agricultural (non-oil) and non-agricultural (oil) goods and vice-versa. This empirical relationship followed closely to what economic theory have suggested. The study recommends amongst others, that government should adopt appropriate monetary and fiscal policies that will ensure realistic and stable exchange rates and foster economic growth through import and export of agricultural products.
The study of export volatility is important because it plays important roles in the growth of an economy. Most previous studies on export had concentrated on investigating its dynamics with classical econometric models which have static parameters that are incapable of capturing its associated time-varying dynamics and volatility. This paper proposes a Bayesian time-varying parameter dynamic linear model to investigate major non-oil export predictors in the Nigerian economy. The Kalman filter and Markov chain Monte Carlo (MCMC) algorithm are used to perform posterior Bayesian inference on time-varying parameters which implicitly describes the fluctuating relationships between the key drivers of export in an economy. In particular, we investigate the predictive performance of relevant macroeconomic variables on non-oil export using a Bayesian time-varying parameter model. Empirical results show that Gross Domestic Product (GDP) and Lending Rate predict the level of fluctuation in non-oil export in Nigeria for the period under consideration. Some policy implications and change point analyses of these results are also discussed.
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