Home

>

Revisiting the accuracy of inflation forecasts in Nigeria: The oil price-exchange rate-asymmetry perspectives

8 March 2022
Publication Type: Working Paper
JEL Code: E31, E37, E53, O13, Q01, Q18, Q54

Motivated by the distinctive paradoxical nature of the Nigerian economy as the only OPEC oil-exporting economy that yet depends heavily on the importation of gasoline, we are compelled to re-examine the accuracy of the oil-based augmented Philips curve model in the predictability of inflation. Using quarterly data from 1970 to 2020, we investigate whether including the exchange rate into the oil price-based augmented Phillips curve improves the accuracy of forecasting inflation for the Nigerian economy. We rely on the outcomes of our preliminary analysis to account for the presence of endogeneity, persistence, and conditional heteroscedasticity in the predictability of inflation following the Westerlund & Narayan (2015) procedure. We find the extended variant of the oil price-based Phillips curve model that includes the exchange rate pass-through as most accurate for improving inflation forecasts in Nigeria. Given the robustness of our results from several models, we conclude that the exchange rate channel through which shocks to the oil price transmit into the economy is essential for forecasting inflation.

Working paper 875
1 February 2022
SHARE THIS Working Paper PUBLICATION:

Related South Africa’s Cities and Growth Spatial Challenges and Policy Interventions Content

Request for Proposals: The role of cities as drivers of growth and employment
Background Urbanization in South Africa is expected to reach 80% by...
Published: 27 July 2023
Call for Work
South Africa’s future will be decided in our cities
Discussion Document 14 South Africa’s cities face multiple, overlap...
Published: 23 June 2023
Dieter von Fintel, Justin Visagie, Ivan Turok, Takwanisa Machemedze, Claus Rabe, Sebastian Galiani, Edward Glaeser
Discussion Document
Monitoring South Africa’s metropolitan economies: A survey of the data landscape
Discussion Document 13 Disparities in data across different metropo...
Published: 22 May 2023
Dieter von Fintel
Discussion Document
Cities, productivity and Jobs in SA: Problems and potential
Discussion Document 12 Cities contribute to national prosperity bec...
Published: 22 May 2023
Ivan Turok, Justin Visagie
Discussion Document
Place-based economic policies: international lessons for South Africa
Discussion Document 11 Place-based policies are designed to support...
Published: 22 May 2023
Harris Selod, Claus Rabe
Discussion Document
What luminosity data can and cannot reveal about South Africa’s urban economies
Discussion Document 10 As novel types of data are becoming availabl...
Published: 22 May 2023
Takwanisa Machemedze
Discussion Document
Crime: A policy-oriented survey
Discussion Document 9 South Africa has a reputation for having high...
Published: 22 May 2023
Sebastian Galiani
Discussion Document
Virtual CDE Workshop on SA Cities and Growth
Urban economics has provided powerful insights into how the charact...
Published: 12 December 2022
Workshop

Search Resources

Ground Floor Brookside Building
11 Imam Haron Road
Claremont, 7700
Cape Town

PostNet Suite # 109
Private Bag X1005
Claremont 7735
Cape Town

Get Social