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Crude oil price dynamics and transmission mechanism of the macroeconomic indicators in N igeria
Author(s) -
Omojolaibi Joseph Ayoola
Publication year - 2014
Publication title -
opec energy review
Language(s) - English
Resource type - Journals
eISSN - 1753-0237
pISSN - 1753-0229
DOI - 10.1111/opec.12031
Subject(s) - economics , volatility (finance) , crude oil , econometrics , oil price , vector autoregression , autoregressive model , impulse response , monetary economics , error correction model , money supply , price fluctuation , price level , macroeconomics , monetary policy , cointegration , agricultural economics , mathematics , mathematical analysis , petroleum engineering , engineering
The preoccupation of this study is to investigate the dynamic impacts of crude oil price on the economic growth of Nigeria. The technique of estimation used in this study is the structural vector autoregressive type. This method is applied to articulate the transmission mechanism of macroeconomic effects of domestic price level, economic output, money supply and volatile crude oil price in Nigeria. The study sample covers the period between 1985 and 2010. The data used are on a quarterly basis. The results of both the impulse response functions and the forecast error variance decompositions indicate that domestic shocks are responsible for a reasonable portion of crude oil price fluctuations. Although crude oil price volatility has significant positive impacts on economic output, however, money supply shocks are the main cause of gross domestic product fluctuations. This study concludes that crude oil price has very important impact on the Nigerian economy and the monetary policy is the channel through which this impact transmits.