Exchange Rates and the Consumer Price Index in Nigeria: A Causality Approach
No Thumbnail Available
Date
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
Description
This paper was motivated by the need to establish the impact of importation into �igeria and its main objectives
were to find out the significant relationships between the official and parallel exchange rates and the consumer
price index (CPI.). It also established that import ratio in the economy is a contributor to the increase in the
cost of living (CPI) in the country. The paper adopted the techniques of correlation and Granger causality to
find the significance of the relationships between the index and the exchange rates. It found out that there is
higher positive relationship between the ratio of imports and the index than exist between the parallel and
official rates. The coefficient between autonomous exchange rates and the consumer price index (CPI) is less
significant than official rate, while the import ratio in the economy shows a near two-way balance causality
with the consumer price index. The more significant one is causality is that import ratio granger causes CPI.
The paper recommends a more liberalised foreign exchange market to reduce the impact of the parallel market
and increase in domestic production of consumables to reduce importation of domestically substitutable goods
in the economy.
Keywords
HB Economic Theory