Do Asymmetric Currency Price Fluctuations and Oil Price Shocks Matter for Growth in Nigeria? Evidence from Non-Linear Analysis

Yıl 2020, Cilt: 70 Sayı: 1, 17 - 46, 30.06.2020

Mohammed Shuaıbu

https://doi.org/10.26650/ISTJECON2020-0006

Öz

This paper examines the nexus between exchange rate fluctuations, oil price shocks, and growth in Nigeria, considering misspecification issues, endogeneity bias, and small sample size, which have not received adequate attention. Using a non-linear ARDL model, findings show that accounting for oil price and exchange rate asymmetries is important in explaining growth in the country for the period 1981-2016. The results also indicate that in the long-run, an exchange rate depreciation has a significant positive impact on growth. A negative oil price shock exerts a positive long-run effect on growth while higher oil prices have a negative impact. The oil price impact not only validates the Dutch disease hypothesis, but also reflects the government’s limited fiscal buffers and savings over time. Contemporaneously, oil price shocks affect growth distinctly as high oil prices boost growth while negative shocks retrogress productivity. While the impact of currency depreciation on growth was found to be positive, an appreciation hurt growth in the short term. The findings reinforce the need for the government to urgently minimize the country’s vulnerability to global crude oil markets as well as dependence on imports to stabilize the Nigerian Naira/ US dollar exchange rate.

Anahtar Kelimeler

Oil price, Exchange rate, Economic growth, Asymmetries, Non-linear ARDL

Asimetrik Döviz Kuru Dalgalanmaları ve Petrol Fiyat Şokları Nijerya’nın Büyümesinde Önemli Midir? Doğrusal Olmayan ARDL Analizinden Bulgular

Öz

Bu çalışma yeteri kadar dikkate alınmayan yanlış tanımlama sorunlarını, içsellik problemini ve küçük örneklem boyutunu göz önünde bulundurarak döviz kuru dalgalanmaları, petrol fiyat şokları ve Nijerya’nın büyümesi arasındaki ilişkiyi incelemektedir. Doğrusal olmayan ARDL modeli kullanılarak elde edilen bulgular, ülkenin 1981-2016 dönemindeki büyümesini açıklamada petrol fiyatlarının ve döviz kuru asimetrilerinin önemli olduğunu göstermektedir. Sonuçlar ayrıca uzun vadede döviz kurunun değer kaybetmesinin büyümede önemli bir pozitif etkisinin olduğunu belirtmektedir. Petrol fiyatlarındaki negatif şok uzun vadede büyümeyi pozitif bir şekilde etkilerken, yüksek petrol fiyatlarının ise olumsuz etkisi vardır. Petrol fiyatlarının etkisi sadece Hollanda hastalığı hipotezini geçerli kılmaz, aynı zamanda hükümetin zaman içindeki sınırlı mali tamponlarını ve tasarruflarını yansıtmaktadır. Eş zamanlı olarak, petrol fiyat şokları büyümeyi farklı şekilde etkilemektedir. Yüksek petrol fiyatları büyümeyi artırırken, negatif şoklar verimliliği düşürür. Döviz kurunun değer kaybetmesinin büyüme üzerinde pozitif etkisi bulunurken, değer kazanması kısa vadede büyümeye zarar vermektedir. Elde edilen bulgular hükümetin ülkenin küresel ham petrol piyasalarına olan kırılganlığını, aynı zamanda Nijerya Nairası/Dolar kurunu dengede tutmak için ithalata bağımlılığını acilen en aza indirmesinin gerektiğini desteklemektedir.

Anahtar Kelimeler

Petrol fiyatı,, Döviz kuru, Ekonomik büyüme, Asimetriler, Doğrusal olmayan ARDL

Kaynakça

• Aghion, P., Bacchetta, P., Ranciere, R., & Rogoff, K. (2009). Exchange rate volatility and productivity growth: the role of financial development. Journal of Monetary Economics, 56, 494-513.
• Aliyu, S. U. R. (2009). Impact of Oil Price Shock and Exchange Rate Volatility on Economic Growth in Nigeria: An Empirical Investigation. MPRA Paper No. 16319. http://mpra.ub.uni-muenchen. de/16319/.
• Alley, I. (2018). Oil Price and the USD-naira exchange arte crash: can economic diversification save the naira. Energy Policy, 118, 245-256.
• Arize, A. C., Malindretos, J., & Igwe, E.U. (2017). Do exchange rate changes improve the trade balance: an asymmetric nonlinear cointegration approach. International Review of Economics and Finance,49, 313-326. http://dx.doi.org/10.1016/j.iref.2017.02.007.
• Bahmani-Oskooee, M. & Fariditavana, H. (2014). Do exchange rate changes have symmetric effect on the s-curve? Economics Bulletin, 34(1), 164-173.
• Bahmani-Oskooee, M. & S. Bahmani (2015). Nonlinear ARDL approach and the demand for money in Iran. Economics Bulletin, 35(1), 381-391.
• Bloom, N. (2007). The impact of uncertainty shocks. NBER Working Paper Series 13385.
• Brown, R. L., Durbin, J., & Evans, J. M. (1975). Techniques for testing the constancy of regression relationships over time. Journal of the Royal Statistical Society, Series B, 37, 149–92.
• Byrne, J. P., Lorusso, M., and Xu, B. (2018) Oil prices, fundamentals and expectations. Energy Economics, 79, 59-75.
• Central Bank of Nigeria (2017). Central bank of nigeria annual report. CBN Abuja, 31st December.
• Davis, S. J., & Haltiwanger, J. (2001). Sectoral job creation and destruction responses to oil price changes. Journal of Monetary Economics, 48, 465–512.
• Dickey, D. A & Fuller, W. A. (1981). Distribution of the estimators for autoregressive time series with a unit root. Econometrica, 49(4), 1057-1072.
• Economou, A. (2016). Oil Price Shocks: A measure of the exogenous and endogenous supply shocks of crude oil. The Oxford Institute for Energy Studies Working Paper No. 68.
• Englama, A., Duke, O.O., Ogunleye, T.S., & Ismail, F.U. (2010). Oil prices and exchange rate volatility in Nigeria: An empirical investigation. Central Bank of Nigeria Economic and Financial Review, 48(3), 31-48.
• Fedoseeva, S. (2017). Under pressure: Dynamic pass-through of oil prices to the RUB/USD Exchange Rate, International Economics, CEPII Research Center, 156, 117-126, http://dx.doi.org/10.1016/j. inteco.2018.01.004.
• Geiger, M. & Scharler, J. (2016). How do Macroeconomic shocks affect expectations? Lessons from Survey Data. Annual Conference 2016 (Augsburg): Demographic Change 145747, Verein für Socialpolitik / German Economic Association.
• Guntner, J. H. F. & Linsbauer, K. (2018). The effects of oil supply and demand shocks on US consumer sentiment. Journal of Money, Credit and Banking, 50(7), 1618-1644.
• Hamilton, J. D. (2003). What is an oil shock? Journal of Econometrics, 113, 363-398.
• Idrisov, G., Kazakova, M. & Polbin, A. (2015). A theoretical interpretation of oil prices impact on the economic growth in contemporary Russia. Russian Journal of Economics, 1, 257-272.
• International Monetary Fund (2017). Article IV consultation press release; Staff report and statement by the executive director for Nigeria. IMF Country Report No. 17/80.
• Jin, G. (2008). The impact of oil price shock and exchange rate volatility on economic growth: A comparative analysis for Russia, Japan and China. Research Journal of International Studies, 8, 98-111.
• Kilian, L. (2014). Oil Price Shocks: causes and consequences. Annual Review of Resource Economics, 6, 133-154.
• Kwiatkowski, D., Phillips, P. C. B., Schmidt, P. & Shin, Y. (1992). Testing the null hypothesis of stationary against the alternative of a unit root: how sure are we that economic time series have a unit root?”, Journal of Econometrics, 54(1-3), 159-178.
• Loayza, N. & Ranciere, R. (2005). Financial Development, Financial Fragility and Growth. International Monetary Fund Working Paper No. 170.
• Lorusso, M. & Pieroni, L. (2018). Causes and consequences of oil price shocks on the UK economy. Economic Modelling. 72, 223-236, https://doi.org/10.1016/j.econmod.2018.01.018.
• Mensah, L., Obi, P. & Bokpin, G. (2017). Cointegration test of oil price and US dollar exchange rates for some oil dependent economies. Research in International Business and Finance, 42, 304-311.
• Mordi, C. N. O. & Adebiyi, M. A. (2010). The asymmetric effects of oil price shocks on output and prices in Nigeria using a structural VAR model. Central Bank of Nigeria Economic and Financial Review, 48(1), 1-32.
• Narayan, P.K. (2005). The Saving and investment nexus for China: Evidence from cointegration tests. Applied Economics, 37(17), 1979-1990.
• Narayan, P.K. & Smyth, R. (2006). What determines migration flows from low-income to high-income countries? An empirical investigation of Fiji-US migration 1972-2001. Contemporary Economic Policy, 24(2), 332-342.
• Osigwe, A.C. (2015). Exchange rate fluctuations, oil prices and economic performance: Empirical evidence from Nigeria. International Journal of Energy Economics and Policy, 5(2), 502-506.
• Perron, P. (2006). Dealing with structural breaks, in palgrave handbook of econometrics, Vol. 1: Econometric Theory, K. Patterson and T. C. Mills (eds.), Palgrave Macmillan, 278-352.
• Pershin, V., Molerob, J. C, & de Graciab, F. P. (2015). Exploring the Oil Prices and Exchange rates nexus in some African economies. Journal of Policy Modeling. Faculty Working Papers 01/15, University of Navarra, http://dx.doi.org/10.1016/j.jpolmod.2015.11.001.
• Pesaran, M. H, Shin, Y. & Smith R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Economics, 16, 289–326. Phillips, P. C. B. & Perron, P. (1988). Testing for a unit root in a time series regression. Biometrika, 75(2), 335-346.
• Prest, B. C. (2018). Explanations for the 2014 Oil Price Decline: Supply or Demand?. Energy Economics, 74, 63-75. http://doi:10.1016/j.eneco.2018.05.029.
• Schnabl, G. (2007). Exchange rate Volatility and Growth in Small Open Economies at the EMU Periphery, European Central Bank Working Paper Series No. 773. July.
• Shin, Y., Yu, B. & Greenwood-Nimmo, M. J. (2014). Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear Framework. In Horrace, Williams C., Sickles, Robin C. (Eds.), Festschrift in Honor of Peter Schmidt, Springer, Science & Business Media, New York (NY).
• Shuaibu, M. I. (2018) Modelling and forecasting macroeconomic fundamentals in nigeria. Nigerian Journal of Securities Markets, 3(1), 15-29.
• Wesseh, P. K. & Lin, B. (2018). Exchange rate fluctuations, oil price shocks and economic growth in a small net-importing economy. Energy, 151, 402-407, http://doi:10.1016/j.energy.2018.03.054.
• World Bank (2017). Nigeria Biannual Economic Update: Fragility Report, No. 1 April.