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Oil Price Volatility and Inflation Rate: Lessons for Overcoming Recession?

Gershon, Obindah and Nwokocha, A. (2017) Oil Price Volatility and Inflation Rate: Lessons for Overcoming Recession? In: Presentation at 10th NAEE/IAEE Annual International Conference, 23rd - 26th April, 2017, Abuja, Nigeria..

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Abstract

An important question is “what are the best options for diversifying a mono-product economy in recession?” Nigeria becomes a good case-study - as rising oil prices portend recovery for her economy, this paper explores the effects of variations in international crude oil prices and shocks on Nigeria’s inflation rate. To better highlight her situation, we analyze inflation rate changes in the twenty-year period (1996 – 2016) with respect to oil price volatility. A detailed analysis of the instability of inflation in Nigeria was performed by correlating it with international crude oil prices, domestic consumer price index and oil export proceeds by creating a VAR model and testing it for trends and correlation. The research reveals that the inflation rate is directly and indirectly affected by changes in oil prices in international markets. However, it was also discovered that shocks in oil prices do not immediately affect inflation rates significantly, but do have a delayed ripple effect that becomes detectible over time. The study also identifies reasons for unexplained variations in statistics and subsequently provides recommendations to minimize Nigeria’s vulnerability to international oil price shocks. One of which is to deepen the financial sector towards channeling resources to the real sector as money supply increases. Second, is to consider the effects of demographic changes on monetary policy measures. Finally, to incorporate the excess supply and its asymmetric effects on international and domestic prices.

Item Type: Conference or Workshop Item (Paper)
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
Divisions: Faculty of Law, Arts and Social Sciences > School of Social Sciences
Depositing User: Mrs Patricia Nwokealisi
Date Deposited: 22 Jan 2018 13:30
Last Modified: 22 Jan 2018 13:30
URI: http://eprints.covenantuniversity.edu.ng/id/eprint/10101

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