<abstract xmlns="http://www.w3.org/1999/xhtml">

<bold>Research background:</bold> There have been several studies on the degree of exchange rate pass-through (ERPT) to consumer prices, as well as macroeconomic environment with yet no clear direction.
<bold>Purpose:</bold> This research work investigates exchange rate pass-through effects into consumer prices in Nigeria from 1960 to 2018.
<bold>Research methodology:</bold> The methodology employed by the study for estimation is the Johansen cointegration and Vector Error Correction Model (VECM) procedures.
<bold>Results:</bold> The empirical results indicate an incomplete pass-through of exchange rate into consumer prices in Nigeria. The pass-through is found to be 1.6 for the model under consideration. The impulse response function results indicate that the response of the consumer prices to the exchange rate shock decreases immediately to a negative shock in the short run, and continues along the horizon to a positive shock in the long run. Also, the response of consumer prices to interest rate shock decreases immediately and continues to fluctuate to a negative shock in both the short run long run horizon.
<bold>Novelty:</bold> The results support the view that exchange rate policy should be complimented with coordinated macroeconomic policy approaches in order to control inflationary level in the economy. The study therefore recommends that the Federal Government should adopt a tightening of the monetary policy as it will help reduce the impact of exchange rate depreciation on consumer prices.
</abstract>

Research background: There have been several studies on the degree of exchange rate pass-through (ERPT) to consumer prices, as well as macroeconomic environment with yet no clear direction.
Purpose: This research work investigates exchange rate pass-through effects into consumer prices in Nigeria from 1960 to 2018.
Research methodology: The methodology employed by the study for estimation is the Johansen cointegration and Vector Error Correction Model (VECM) procedures.
Results: The empirical results indicate an incomplete pass-through of exchange rate into consumer prices in Nigeria. The pass-through is found to be 1.6 for the model under consideration. The impulse response function results indicate that the response of the consumer prices to the exchange rate shock decreases immediately to a negative shock in the short run, and continues along the horizon to a positive shock in the long run. Also, the response of consumer prices to interest rate shock decreases immediately and continues to fluctuate to a negative shock in both the short run long run horizon.
Novelty: The results support the view that exchange rate policy should be complimented with coordinated macroeconomic policy approaches in order to control inflationary level in the economy. The study therefore recommends that the Federal Government should adopt a tightening of the monetary policy as it will help reduce the impact of exchange rate depreciation on consumer prices.

Investigating Exchange Rate Pass-through to Consumer Prices in Nigeria

Department of Economics, Faculty of Social Sciences

Folia Oeconomica Stetinensia

This work is licensed under the Creative Commons Attribution-ShareAlike 4.0 International License.

{"article-title":"Investigating Exchange Rate Pass-through to Consumer Prices in Nigeria"}

Research background: There have been several studies on the degree of exchange rate pass-through (ERPT) to consumer prices, as well as macroeconomic...

Investigating Exchange Rate Pass-through to Consumer Prices in Nigeria

Published Online: Jun 24, 2021

Page range: 105 - 121

Received: Jul 30, 2020

Accepted: Mar 31, 2021

DOI: https://doi.org/10.2478/foli-2021-0008

Keywords
ERPT, Consumer prices index, cointegration, VECM, Nigeria

© 2021 Ephraim Ugwu et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-ShareAlike 4.0 International License.

Investigating Exchange Rate Pass-through to Consumer Prices in Nigeria

Published Online: Jun 24, 2021

Page range: 105 - 121

Received: Jul 30, 2020

Accepted: Mar 31, 2021

DOI: https://doi.org/10.2478/foli-2021-0008

KeywordsERPT, Consumer prices index, cointegration, VECM, Nigeria

© 2021 Ephraim Ugwu et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-ShareAlike 4.0 International License.

Keywords
ERPT, Consumer prices index, cointegration, VECM, Nigeria