Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models

Audu Isah; Husseini Garba Dikko; Ejiemenu Sarah Chinyere

doi:doi:10.11648/j.ajtas.20150405.16

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Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models

Audu Isah, Husseini Garba Dikko, Ejiemenu Sarah Chinyere

Published in American Journal of Theoretical and Applied Statistics (Volume 4, Issue 5)

Received: 16 July 2015 Accepted: 24 July 2015 Published: 19 August 2015

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Abstract

This study investigated the impact of crude oil shocks (COP) on exchange rate (EXCHR), external reserves (EXRS), gross domestic product (GDP), inflation rate (INFL), international trade (INTR) and money supply (MSUP) in Nigeria with a quarterly data from 2000 to 2014 using GARCH and VAR models. From the analysis, all the variables were stationary at first difference with p-value less than 0.05. The presence of heteroscedasticity was found in exchange rate with most of its coefficient models being significant at 5% level and the forecasting model for exchange rate is GARCH (2, 1). Crude oil shocks did not pose significant inflationary threat to the Nigerian economy in the short run; rather, it improves the level of gross domestic product. However, external reserves and international trade were significantly affected due to the recent fall in crude oil export. Oil shocks also positively affected money supply showing that monetary policy response to oil price changes; at the same time, money supply did affect GDP. These show that a diversified economy is really needed

Published in	American Journal of Theoretical and Applied Statistics (Volume 4, Issue 5)
DOI	10.11648/j.ajtas.20150405.16
Page(s)	359-367
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Crude Oil, Macroeconomic Variables, GARCH, VAR and IRF

References

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[4]	Bernard Okumagba (2014) “Falling Crude Oil Prices and Nigeria’s Response”. The Guardian Newspaper December 29, 2014.
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[8]	Eltony Nagy M. (1999) “Oil Price fluctuations and their Impact on the Macroeconomic Variables of Kuwait: A Case Study Using VAR Model for Kuwait” No. 6, 14.
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[10]	Gordon Robert J. (1998) “Supply Shocks and Monetary Policy Revisited”. American Economic Review. May, 74(2): 38-43.
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[19]	Peter J. B. and Richard A. D. (2002) “Introduction to Time Series and Forecasting.” Springer Journal. 2nd ed. Pg 164 &167
[20]	Samuel Imarhiagbe (2014) “Examining the Impact of Crude Oil Price on External Reserves: Evidence from Nigeria”. International Journal of Economics and Finance; Vol. 7, No. 5.
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[25]	Wakeford J. (2006) “Impact of Oil Price Shocks on the South African Macroeconomy: History and Prospects in Accelerated and Shared Growth in South Africa: Determinants, Constraints and Opportunities.

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APA Style

Audu Isah, Husseini Garba Dikko, Ejiemenu Sarah Chinyere. (2015). Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models. American Journal of Theoretical and Applied Statistics, 4(5), 359-367. https://doi.org/10.11648/j.ajtas.20150405.16

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ACS Style

Audu Isah; Husseini Garba Dikko; Ejiemenu Sarah Chinyere. Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models. Am. J. Theor. Appl. Stat. 2015, 4(5), 359-367. doi: 10.11648/j.ajtas.20150405.16

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AMA Style

Audu Isah, Husseini Garba Dikko, Ejiemenu Sarah Chinyere. Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models. Am J Theor Appl Stat. 2015;4(5):359-367. doi: 10.11648/j.ajtas.20150405.16

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@article{10.11648/j.ajtas.20150405.16,
  author = {Audu Isah and Husseini Garba Dikko and Ejiemenu Sarah Chinyere},
  title = {Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models},
  journal = {American Journal of Theoretical and Applied Statistics},
  volume = {4},
  number = {5},
  pages = {359-367},
  doi = {10.11648/j.ajtas.20150405.16},
  url = {https://doi.org/10.11648/j.ajtas.20150405.16},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajtas.20150405.16},
  abstract = {This study investigated the impact of crude oil shocks (COP) on exchange rate (EXCHR), external reserves (EXRS), gross domestic product (GDP), inflation rate (INFL), international trade (INTR) and money supply (MSUP) in Nigeria with a quarterly data from 2000 to 2014 using GARCH and VAR models. From the analysis, all the variables were stationary at first difference with p-value less than 0.05. The presence of heteroscedasticity was found in exchange rate with most of its coefficient models being significant at 5% level and the forecasting model for exchange rate is GARCH (2, 1). Crude oil shocks did not pose significant inflationary threat to the Nigerian economy in the short run; rather, it improves the level of gross domestic product. However, external reserves and international trade were significantly affected due to the recent fall in crude oil export. Oil shocks also positively affected money supply showing that monetary policy response to oil price changes; at the same time, money supply did affect GDP. These show that a diversified economy is really needed},
 year = {2015}
}

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TY  - JOUR
T1  - Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models
AU  - Audu Isah
AU  - Husseini Garba Dikko
AU  - Ejiemenu Sarah Chinyere
Y1  - 2015/08/19
PY  - 2015
N1  - https://doi.org/10.11648/j.ajtas.20150405.16
DO  - 10.11648/j.ajtas.20150405.16
T2  - American Journal of Theoretical and Applied Statistics
JF  - American Journal of Theoretical and Applied Statistics
JO  - American Journal of Theoretical and Applied Statistics
SP  - 359
EP  - 367
PB  - Science Publishing Group
SN  - 2326-9006
UR  - https://doi.org/10.11648/j.ajtas.20150405.16
AB  - This study investigated the impact of crude oil shocks (COP) on exchange rate (EXCHR), external reserves (EXRS), gross domestic product (GDP), inflation rate (INFL), international trade (INTR) and money supply (MSUP) in Nigeria with a quarterly data from 2000 to 2014 using GARCH and VAR models. From the analysis, all the variables were stationary at first difference with p-value less than 0.05. The presence of heteroscedasticity was found in exchange rate with most of its coefficient models being significant at 5% level and the forecasting model for exchange rate is GARCH (2, 1). Crude oil shocks did not pose significant inflationary threat to the Nigerian economy in the short run; rather, it improves the level of gross domestic product. However, external reserves and international trade were significantly affected due to the recent fall in crude oil export. Oil shocks also positively affected money supply showing that monetary policy response to oil price changes; at the same time, money supply did affect GDP. These show that a diversified economy is really needed
VL  - 4
IS  - 5
ER  -

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Author Information

Audu Isah

Department of Mathematics, Federal University of Technology, Minna, Nigeria
Husseini Garba Dikko

Department of Mathematics, Ahmadu Bello University, Zaria, Nigeria
Ejiemenu Sarah Chinyere

Department of Mathematics, Ahmadu Bello University, Zaria, Nigeria

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Plain Text BibTeX RIS

APA Style

Audu Isah, Husseini Garba Dikko, Ejiemenu Sarah Chinyere. (2015). Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models. American Journal of Theoretical and Applied Statistics, 4(5), 359-367. https://doi.org/10.11648/j.ajtas.20150405.16

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ACS Style

Audu Isah; Husseini Garba Dikko; Ejiemenu Sarah Chinyere. Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models. Am. J. Theor. Appl. Stat. 2015, 4(5), 359-367. doi: 10.11648/j.ajtas.20150405.16

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AMA Style

Audu Isah, Husseini Garba Dikko, Ejiemenu Sarah Chinyere. Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models. Am J Theor Appl Stat. 2015;4(5):359-367. doi: 10.11648/j.ajtas.20150405.16

Copy | Download

@article{10.11648/j.ajtas.20150405.16,
  author = {Audu Isah and Husseini Garba Dikko and Ejiemenu Sarah Chinyere},
  title = {Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models},
  journal = {American Journal of Theoretical and Applied Statistics},
  volume = {4},
  number = {5},
  pages = {359-367},
  doi = {10.11648/j.ajtas.20150405.16},
  url = {https://doi.org/10.11648/j.ajtas.20150405.16},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajtas.20150405.16},
  abstract = {This study investigated the impact of crude oil shocks (COP) on exchange rate (EXCHR), external reserves (EXRS), gross domestic product (GDP), inflation rate (INFL), international trade (INTR) and money supply (MSUP) in Nigeria with a quarterly data from 2000 to 2014 using GARCH and VAR models. From the analysis, all the variables were stationary at first difference with p-value less than 0.05. The presence of heteroscedasticity was found in exchange rate with most of its coefficient models being significant at 5% level and the forecasting model for exchange rate is GARCH (2, 1). Crude oil shocks did not pose significant inflationary threat to the Nigerian economy in the short run; rather, it improves the level of gross domestic product. However, external reserves and international trade were significantly affected due to the recent fall in crude oil export. Oil shocks also positively affected money supply showing that monetary policy response to oil price changes; at the same time, money supply did affect GDP. These show that a diversified economy is really needed},
 year = {2015}
}

Copy | Download

TY  - JOUR
T1  - Modeling the Impact of Crude Oil Price Shocks on Some Macroeconomic Variables in Nigeria Using Garch and VAR Models
AU  - Audu Isah
AU  - Husseini Garba Dikko
AU  - Ejiemenu Sarah Chinyere
Y1  - 2015/08/19
PY  - 2015
N1  - https://doi.org/10.11648/j.ajtas.20150405.16
DO  - 10.11648/j.ajtas.20150405.16
T2  - American Journal of Theoretical and Applied Statistics
JF  - American Journal of Theoretical and Applied Statistics
JO  - American Journal of Theoretical and Applied Statistics
SP  - 359
EP  - 367
PB  - Science Publishing Group
SN  - 2326-9006
UR  - https://doi.org/10.11648/j.ajtas.20150405.16
AB  - This study investigated the impact of crude oil shocks (COP) on exchange rate (EXCHR), external reserves (EXRS), gross domestic product (GDP), inflation rate (INFL), international trade (INTR) and money supply (MSUP) in Nigeria with a quarterly data from 2000 to 2014 using GARCH and VAR models. From the analysis, all the variables were stationary at first difference with p-value less than 0.05. The presence of heteroscedasticity was found in exchange rate with most of its coefficient models being significant at 5% level and the forecasting model for exchange rate is GARCH (2, 1). Crude oil shocks did not pose significant inflationary threat to the Nigerian economy in the short run; rather, it improves the level of gross domestic product. However, external reserves and international trade were significantly affected due to the recent fall in crude oil export. Oil shocks also positively affected money supply showing that monetary policy response to oil price changes; at the same time, money supply did affect GDP. These show that a diversified economy is really needed
VL  - 4
IS  - 5
ER  -

Copy | Download