Causal Relationship among Domestic Oil Price, Exchange Rate and Inflation in Nigeria: An Application

The aim of this paper is to look into the causal relationship between domestic oil prices, exchange rates, and inflation rates in Nigeria from 1985 to 2019. The Johansen test for cointegration and the Granger causality technique for vector error correction were used. The results of the Johansen cointegration test showed that the variables and the vector error correction model have a solid cointegration. The Granger causality result shows that one-way causalities occur between the exchange rate and inflation rate, as well as between the exchange rate and domestic oil price, with no long-run causalities in the inflation rate and domestic oil price equations.There are unidirectional causalities from domestic oil prices to exchange rates and inflation to exchange rates, as well as long-run causality in the exchange rate equation. According to the current investigation, Nigeria may be more prosperous if the country's monetary authorities consider policy thrusts aimed at targeting both inflation and exchange rates, as well as the Petroleum Products Pricing Regulation Agency's (PPPRA) maintaining a steady petroleum pump price to help in reducing the country's rising rate of inflation.

Please see the link :- https://globalpresshub.com/index.php/AJEFM/article/view/944