A Var Approach to Exchange Rate and Consumer Price Index Shocks on Economic Growth in Nigeria

Abstract

This paper attempt to assess the influence of exchange rate on economic growth in Nigeria using time series analysis from 1981-2021. Vector Autoregressive Method (VAR) was utilized as a method of analysis. The World Bank repository provides the data for this study. Real Gross Domestic Product was the dependent variable, while exchange rate and consumer price index were the independent variables. The result of the unit root test shows that all the variables are stationary at first difference. That enabled the researchers to use VAR to estimate the long run relationship among the variables. It was further revealed that the current value of the variables is explained by their past value. Exchange rate was found to be the most important determinant for growth in Nigeria, and that the Nigerian economy is sensitive to exchange rate shocks.