Internal and external drivers of inflation in Nigeria
This study contributes to the literature on inflation dynamics by examining whether internal or external factors drive inflationary pressure in Nigeria. Using the annual time series data from 1981 to 2017 and applying Johansen cointegration analysis, the vector error correction mechanism and the imp...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2019-12-01
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| Series: | Banks and Bank Systems |
| Subjects: | |
| Online Access: | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/12947/BBS_2019_04_Adeleye.pdf |
| _version_ | 1818519941277548544 |
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| author | Ngozi Adeleye Adeyemi A. Ogundipe Oluwatomisin Ogundipe Ifeoluwa Ogunrinola Oluwasogo Adediran |
| author_facet | Ngozi Adeleye Adeyemi A. Ogundipe Oluwatomisin Ogundipe Ifeoluwa Ogunrinola Oluwasogo Adediran |
| author_sort | Ngozi Adeleye |
| collection | DOAJ |
| description | This study contributes to the literature on inflation dynamics by examining whether internal or external factors drive inflationary pressure in Nigeria. Using the annual time series data from 1981 to 2017 and applying Johansen cointegration analysis, the vector error correction mechanism and the impulse response function, the study reveals some compelling evidence to suggest that external forces are responsible for inflationary pressure in Nigeria. The results, amongst others, reveal that: external drivers – exchange rate, imported inflation and openness – induce a positive and direct relation to inflation. This is because a percentage change in these variables results in an increase in inflation of 0.49%, 0.47% and 4.28%, respectively, on average, ceteris paribus; the internal drivers – government expenditures, net food exports and lending interest rate – dampen inflation by 0.48%, 1.70% and 0.02%, respectively, on average, ceteris paribus; there is evidence of cointegration indicating that 57.48% of short-run errors will be corrected in the long run; imported inflation contributes to a deviation of about 33% deviation in the first five periods and accounts for cumulative average of over 100% deviation in inflation. Policy implications are discussed. |
| first_indexed | 2024-12-11T01:30:46Z |
| format | Article |
| id | doaj.art-8ddc7e03a0b04f3a8f889682e99c8c5f |
| institution | Directory Open Access Journal |
| issn | 1816-7403 1991-7074 |
| language | English |
| last_indexed | 2024-12-11T01:30:46Z |
| publishDate | 2019-12-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Banks and Bank Systems |
| spelling | doaj.art-8ddc7e03a0b04f3a8f889682e99c8c5f2022-12-22T01:25:22ZengLLC "CPC "Business Perspectives"Banks and Bank Systems1816-74031991-70742019-12-0114420621810.21511/bbs.14(4).2019.1912947Internal and external drivers of inflation in NigeriaNgozi Adeleye0Adeyemi A. Ogundipe1Oluwatomisin Ogundipe 2Ifeoluwa Ogunrinola3Oluwasogo Adediran4Ph.D., Lecturer, Department of Economics and Development Studies, Covenant UniversityPh.D., Lecturer, Department of Economics and Development Studies, Covenant UniversityPh.D., Lecturer, Department of Economics and Development Studies, Covenant UniversityPh.D., Lecturer, Department of Economics and Development Studies, Covenant UniversityPh.D., Lecturer, Department of Economics and Development Studies, Covenant UniversityThis study contributes to the literature on inflation dynamics by examining whether internal or external factors drive inflationary pressure in Nigeria. Using the annual time series data from 1981 to 2017 and applying Johansen cointegration analysis, the vector error correction mechanism and the impulse response function, the study reveals some compelling evidence to suggest that external forces are responsible for inflationary pressure in Nigeria. The results, amongst others, reveal that: external drivers – exchange rate, imported inflation and openness – induce a positive and direct relation to inflation. This is because a percentage change in these variables results in an increase in inflation of 0.49%, 0.47% and 4.28%, respectively, on average, ceteris paribus; the internal drivers – government expenditures, net food exports and lending interest rate – dampen inflation by 0.48%, 1.70% and 0.02%, respectively, on average, ceteris paribus; there is evidence of cointegration indicating that 57.48% of short-run errors will be corrected in the long run; imported inflation contributes to a deviation of about 33% deviation in the first five periods and accounts for cumulative average of over 100% deviation in inflation. Policy implications are discussed.https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/12947/BBS_2019_04_Adeleye.pdfdomestic inflationexternal inflationinflation dynamicsinflation targetingNigeria |
| spellingShingle | Ngozi Adeleye Adeyemi A. Ogundipe Oluwatomisin Ogundipe Ifeoluwa Ogunrinola Oluwasogo Adediran Internal and external drivers of inflation in Nigeria Banks and Bank Systems domestic inflation external inflation inflation dynamics inflation targeting Nigeria |
| title | Internal and external drivers of inflation in Nigeria |
| title_full | Internal and external drivers of inflation in Nigeria |
| title_fullStr | Internal and external drivers of inflation in Nigeria |
| title_full_unstemmed | Internal and external drivers of inflation in Nigeria |
| title_short | Internal and external drivers of inflation in Nigeria |
| title_sort | internal and external drivers of inflation in nigeria |
| topic | domestic inflation external inflation inflation dynamics inflation targeting Nigeria |
| url | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/12947/BBS_2019_04_Adeleye.pdf |
| work_keys_str_mv | AT ngoziadeleye internalandexternaldriversofinflationinnigeria AT adeyemiaogundipe internalandexternaldriversofinflationinnigeria AT oluwatomisinogundipe internalandexternaldriversofinflationinnigeria AT ifeoluwaogunrinola internalandexternaldriversofinflationinnigeria AT oluwasogoadediran internalandexternaldriversofinflationinnigeria |