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Internal and external drivers of inflation in Nigeria

Adeleye, Bosede Ngozi and Ogundipe, Adeyemi A. and Ogundipe, Oluwatomisin and Ogunrinola, Ifeoluwa I. and Adediran, Oluwasogo (2019) Internal and external drivers of inflation in Nigeria. Banks and Bank Systems, 14 (4). pp. 207-219.

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This study contributes to the literature on inflation dynamics by examining whether internal or external factors drive inflationary pressure in Nigeria. Using the annual time series data from 1981 to 2017 and applying Johansen cointegration analysis, the vector error correction mechanism and the impulse response function, the study reveals some compelling evidence to suggest that external forces are responsible for inflationary pressure in Nigeria. The results, amongst others, reveal that: external drivers– exchange rate, imported inflation and openness – induce a positive and direct relation to inflation. This is because a percentage change in these variables results in an increase in inflation of 0.49%, 0.47% and 4.28%, respectively, on average, ceteris paribus; the internal drivers – government expenditures, net food exports and lending interest rate – dampen inflation by 0.48%, 1.70% and 0.02%, respectively, on average, ceteris paribus; there is evidence of cointegration indicating that 57.48% of short-run errors will be corrected in the long run; imported inflation contributes to a deviation of about 33% deviation in the first five periods and accounts for cumulative average of over 100% deviation in inflation. Policy implications are discussed

Item Type: Article
Uncontrolled Keywords: inflation dynamics, inflation targeting, domestic inflation, external inflation, Nigeria
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 Hannah Akinwumi
Date Deposited: 13 May 2021 15:25
Last Modified: 13 May 2021 15:25

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