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Trans-Atlantic Transmission of Inflation Rate Shocks: Any Macroeconomic Concern for Nigeria?

Author

Listed:
  • Agu, Anthony O.

    (Department of Economics, Chukwuemeka Odumegwu Ojukwu University, Igbariam, Anambra State)

  • Adonike, Kingsley Chidera

    (Department of Economics, Chukwuemeka Odumegwu Ojukwu University, Igbariam, Anambra State)

  • Egbunike, Innocent Ifeanacho

    (Department of Economics, Chukwuemeka Odumegwu Ojukwu University, Igbariam, Anambra State)

  • Ideh, Timothy Ogbemudiare

    (Department of Economics, Dennis Osadebe University, Asaba, Delta State, Nigeria)

Abstract

The great convergence of global economies has led to undue uncertainties in several domestic economies. In the era of globalization, macroeconomic policies applied in one country can have a trans-boarder effect on other countries, either positively or negatively. As a result, this research paper focuses on examining the transmission of inflation rate shocks from the trans-Atlantic regions and its potential macroeconomic implications in Nigeria. The study utilizes annual time series data from the World Bank’s Development Indicators for the year 2023. To achieve the objectives of this investigation, several econometric tests were conducted on the relevant variables. These tests include the Augmented Dickey-Fuller (ADF) test, Philip Peron Test, Johansen Cointegration test, variance decomposition test, and impulse response test. Each of these tests serves a specific purpose in analyzing the relationship between the policy variables and their impact on Nigerian economy. The impulse response analysis of our VAR model shows that Nigerian variables respond significantly to shocks from foreign variables. The study therefore concluded that macroeconomic shocks in Nigeria are mostly from across the Atlantic. In line with this, the study recommended that the Central Bank of Nigeria (CBN) should be cautious of both domestic developments and movements in the US prices in order to assess the potential risks of inflation.

Suggested Citation

  • Agu, Anthony O. & Adonike, Kingsley Chidera & Egbunike, Innocent Ifeanacho & Ideh, Timothy Ogbemudiare, 2024. "Trans-Atlantic Transmission of Inflation Rate Shocks: Any Macroeconomic Concern for Nigeria?," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(11), pages 743-755, November.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:11:p:743-755
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    References listed on IDEAS

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    3. Chuku A. Chuku & Usenobong F. Akpan & Ndifreke R. Sam & Ekpeno L. Effiong, 2011. "Oil price shocks and the dynamics of current account balances in Nigeria," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 35(2), pages 119-139, June.
    4. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
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