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An Autoregressive and Distributed Lag Model Approach to Inflation in Nigeria

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Listed:
  • Chimere Okechukwu Iheonu
  • Godfrey Ikechukwu Ihedimma
  • Samuel Nzube Eze

Abstract

This study scrutinized the precursors of Inflation in Nigeria between the periods 1980 to 2014. The Augmented Dickey-Fuller test was engaged to test for stationarity of the variables while the Autoregressive and Distributed lag (ARDL) Model was applied to capture the affiliation between inflation and selected macroeconomic variables. Our findings revealed that there exists a long run relationship between Inflation, money supply, interest rate, GDP per capita and exchange rate in Nigeria while in the short run, money supply has a significant positive one period lag effect on Inflation and Interest Rate also has a significant negative one period lag influence on Inflation in Nigeria. Recommendations are that in the short run, monetary policies should be geared towards the control of money supply and interest rate in Nigeria in other to regulate Inflation and also, the Nigerian economy can afford to vary any of human capital development or technological advancement to boost productivity without causing inflation as GDP per capita proved insignificant in the short run.

Suggested Citation

  • Chimere Okechukwu Iheonu & Godfrey Ikechukwu Ihedimma & Samuel Nzube Eze, 2017. "An Autoregressive and Distributed Lag Model Approach to Inflation in Nigeria," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 3(1), pages 73-80, March.
    • Handle: RePEc:khe:scajes:v:3:y:2017:i:1:p:73-80
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    References listed on IDEAS

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    1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    2. I, Sahadudheen, 2012. "A cointegration and error correction approach to the determinants of inflation in India," MPRA Paper 65561, University Library of Munich, Germany, revised 2012.
    3. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
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    More about this item

    Keywords

    Inflation; ARDL; money supply; interest rate;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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