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Examination of the Exchange Rate and Import Price Pass-through to Inflation: A View from Nigeria
Samuel F Onipede
Central Bank of Nigeria
Corresponding Author
ORCiD: https://orcid.org/0000-0001-5191-1515
License:
This work is licensed under a Creative Commons Attribution 4.0 International License. Read Full License
We examine the effect of exchange rate and import price pass-through to inflation in Nigeria using headline inflation and import price data, with the aid of a non-recursive Structural Vector Autoregression model. Our results indicate mostly incomplete ERPT and IPPT to inflation. Specifically, we found that (i) the ERPT to the INF is incomplete at all horizons. (ii) IPPT to the INF is incomplete at all horizons. (iii) IPPT to inflation is relatively more rapid than the ERPT to inflation. The findings further suggest that the monetary authority should be wary of using devaluation of the domestic currency as a way of propping up the economy as that would not only aggravate domestic inflation but likely to also increase the ERPT. Similarly, harmonizing the disparate exchange rate windows in the economy might reduce import price pass-through to domestic inflation. Also, the size and speed of both ERPT and IPPT from the study suggest that relevant authorities need to strengthen domestic industries and instill confidence in consumers, to reduce reliance on imports.
JEL Classification: C32; E31; F31; 055
Keywords
Exchange rate pass-through, import price pass-through, SVAR, inflation
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This is a preprint. It has not completed peer review.
Research
Examination of the Exchange Rate and Import Price Pass-through to Inflation: A View from Nigeria
Samuel F Onipede
Central Bank of Nigeria
Corresponding Author
ORCiD: https://orcid.org/0000-0001-5191-1515
Badges
Prescreen
This manuscript passed our Prescreen assessment
Complete author information
Appropriate declaration statements
Potential risks to human health
Prescreen
History
CURRENT STATUS: Posted
Version 1
Posted 07 Jul, 2020
No community comments so far
Metrics
Comments: 0
PDF Downloads: ...
HTML Views: ...
Subject Areas
Other Economics
License:
This work is licensed under a Creative Commons Attribution 4.0 International License. Read Full License
We examine the effect of exchange rate and import price pass-through to inflation in Nigeria using headline inflation and import price data, with the aid of a non-recursive Structural Vector Autoregression model. Our results indicate mostly incomplete ERPT and IPPT to inflation. Specifically, we found that (i) the ERPT to the INF is incomplete at all horizons. (ii) IPPT to the INF is incomplete at all horizons. (iii) IPPT to inflation is relatively more rapid than the ERPT to inflation. The findings further suggest that the monetary authority should be wary of using devaluation of the domestic currency as a way of propping up the economy as that would not only aggravate domestic inflation but likely to also increase the ERPT. Similarly, harmonizing the disparate exchange rate windows in the economy might reduce import price pass-through to domestic inflation. Also, the size and speed of both ERPT and IPPT from the study suggest that relevant authorities need to strengthen domestic industries and instill confidence in consumers, to reduce reliance on imports.
JEL Classification: C32; E31; F31; 055
Figure 1
Due to technical limitations, full-text HTML conversion of this manuscript could not be completed. However, the manuscript can be downloaded and accessed as a PDF.