An Assymetric Evaluation of Oil Price- Inflation Nexus: Evidence from Nigeria

Alimi, Ahmed S.; Olaniran, Oladotun D.; Ayuba, Timothy

doi:10.18488/journal.82.2020.71.1.11

Cited by 3 publications

(3 citation statements)

References 7 publications

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“…The relationship between commodity prices and inflation is complex and varies across different countries and periods. In Nigeria, fluctuations in oil prices asymmetrically influence domestic inflation, with both increases and decreases in oil prices leading to a decline in inflation [24]. In Saudi Arabia, there is a dynamic nexus between oil prices, the Saudi/US dollar exchange rate, inflation, and output growth rate [25].…”

Section: Commodity Prices (Cocoa Oil Gold Petrol Diesel) and Inflatio...mentioning

confidence: 99%

Understanding Global Commodity Price Shocks on Exchange Rates and Inflation in Emerging Economies: ARDL Perspective

Boateng,

Karikari,

Fumey

et al. 2024

JEMT

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Aims: To analyze the changing relationship between commodity prices (cocoa, diesel, gold, oil, petrol) and macroeconomic factors (exchange rate and inflation) in Ghana and differentiate between long-term and short-term effects. Study Design: Quantitative Design with Time series analysis using the Autoregressive Distributed Lag (ARDL) technique. Methodology: The study utilized cointegration and Error Correction Model in econometric estimation. Time series data for commodity prices and macroeconomic factors were collected for the period 2003M01 to 2023M10. The ARDL technique was applied to differentiate between long-term and short-term effects of inflation and exchange rates. Results: The short-run and long-run results indicate a positive relationship between commodity prices and inflation and exchange rates. A 1% increase in diesel prices is associated with a 0.23% appreciation in Ghana's currency in the short run (p=0.019) and a 1.76% rise in inflation in the long run (p=0.012). Past inflation has a dominant influence on current inflation, with a 1 percentage point increase in the previous year's inflation leading to a 0.45 percentage point increase in the current inflation rate. Conclusion: Policymakers should prioritize stabilizing diesel prices, invest in storage facilities, promote alternative energy sources, strengthen domestic production and distribution of essential commodities, and adopt targeted monetary and fiscal policies to anchor inflationary expectations and address inflation inertia in Ghana.

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Section: Commodity Prices (Cocoa Oil Gold Petrol Diesel) and Inflatio...mentioning

confidence: 99%

Understanding Global Commodity Price Shocks on Exchange Rates and Inflation in Emerging Economies: ARDL Perspective

Boateng,

Karikari,

Fumey

et al. 2024

JEMT

View full text Add to dashboard Cite

show abstract

“…Conversely, Nasir et al (2023) posited that negative shocks to oil prices had a greater impact than positive shocks of comparable magnitude on domestic inflation in Nigeria. Alimi et al (2020) applied the NARDL modelling approach to assess the asymmetric influence of oil prices on inflation in Nigeria. Their study not only confirmed the asymmetric impact of oil prices on domestic inflation but also affirmed that oil price shocks had a long-term negative effect on domestic inflation.…”

Section: Review Of Related Studiesmentioning

confidence: 99%

“…Alimi et al. (2020) applied the NARDL modelling approach to assess the asymmetric influence of oil prices on inflation in Nigeria. Their study not only confirmed the asymmetric impact of oil prices on domestic inflation but also affirmed that oil price shocks had a long‐term negative effect on domestic inflation.…”

Section: Literature Reviewmentioning

confidence: 99%

Oil price shocks pass‐through to domestic prices in Nigeria

Orekoya,

Adeniyi,

Tijani

2024

OPEC Energy Review

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The study investigated the potential non‐linear impacts of fluctuations in oil prices on domestic prices in Nigeria. Utilising the non‐linear autoregressive distributed lag (NARDL) model, the study revealed the presence of asymmetry in the behaviour of domestic prices. Both forms of oil price shocks were observed to have a negative influence on domestic prices in the short term, with only positive oil price shocks demonstrating statistical significance. However, in the long run, a distinct pattern emerged where a decrease in oil prices significantly affected domestic prices. Additionally, analysis of VAR impulse response showed a consistently negative reaction of domestic prices to oil price shocks, falling below the steady‐state equilibrium. The study concluded that changes in oil prices, in conjunction with other macroeconomic variables, affected the prices of domestic goods in Nigeria, whether in the short or long term. This underscored the complexity of Nigeria's economic landscape. Consequently, it is advisable to prudently invest excess revenue generated from rising oil prices to mitigate the adverse impacts of negative oil shocks on the economy.

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Do Oil Price Fluctuations Affect the Inflation Rate in Indonesia Asymmetrically?

Goh

Law

Trinugroho

2020

Singapore Econ. Rev.

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Changes in the oil price directly affect production costs, and subsequently, the general price level of products. With Indonesia observing an inflation targeting policy, this study applies the nonlinear autoregressive distributed lag (NARDL) technique to investigate the effect of oil price fluctuations in Indonesia. The relationship is important for the central bank to gauge the effectiveness of the inflation targeting policy in immunizing the country from oil price fluctuations. Our findings have revealed that there was an asymmetric behavior between oil price and the inflation rate (producer price index), thus questioning the effectiveness of the inflation targeting policy. More specifically, in the long run, an increase in the oil price will tend to lead to an increase in the rate of inflation with a greater deviation, while an oil price reduction will lead to a decrease in the inflation rate with a lower deviation. This suggests that the benefits of an oil price reduction are not passed down to the consumer.

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An Assymetric Evaluation of Oil Price- Inflation Nexus: Evidence from Nigeria

Cited by 3 publications

References 7 publications

Understanding Global Commodity Price Shocks on Exchange Rates and Inflation in Emerging Economies: ARDL Perspective

Understanding Global Commodity Price Shocks on Exchange Rates and Inflation in Emerging Economies: ARDL Perspective

Oil price shocks pass‐through to domestic prices in Nigeria

Do Oil Price Fluctuations Affect the Inflation Rate in Indonesia Asymmetrically?

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