Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks

Joseph Chukwudi Odionye; Okanta Sunday Ukeje; Augustine Chika Odo

doi:doi:10.11648/j.ijber.20190802.13

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Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks

Joseph Chukwudi Odionye, Okanta Sunday Ukeje, Augustine Chika Odo

Published in International Journal of Business and Economics Research (Volume 8, Issue 2)

Received: 3 January 2019 Accepted: 22 February 2019 Published: 17 May 2019

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Abstract

Motivated by the prevalence of misleading inference in time series occasioned by failure to account for structural breaks in series as volatile as oil price in Nigerian specific studies, this study sought to find out whether structural breaks matter in studying the response of inflation to oil price shocks. The study employed Zivot-Andrews unit root test with structural break to compare the unit root result with the conventional ADF result while the local projection impulse response function (LPIRF) was used to determine the response of inflation dynamics to oil price shocks in Nigeria from 1981 to 2016. The unit root test shows that failure to account for structural break in unit root of a volatile series can produce wrong inference. The LPIRF results suggestedthat inflation responds significantly to oil price shocks and that there exists a higher persistence level of oil price shocksin exchange rate than inflation. Furthermore, the counterfactual result conditioned on global oil market behavior shows that inflation responds significantly to oil price due to global oil market behavior.

Published in	International Journal of Business and Economics Research (Volume 8, Issue 2)
DOI	10.11648/j.ijber.20190802.13
Page(s)	58-64
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2019. Published by Science Publishing Group

Keywords

Oil Price, Inflation Dynamics, Shocks, Structural Break, Impulse Response

References

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APA Style

Joseph Chukwudi Odionye, Okanta Sunday Ukeje, Augustine Chika Odo. (2019). Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks. International Journal of Business and Economics Research, 8(2), 58-64. https://doi.org/10.11648/j.ijber.20190802.13

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ACS Style

Joseph Chukwudi Odionye; Okanta Sunday Ukeje; Augustine Chika Odo. Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks. Int. J. Bus. Econ. Res. 2019, 8(2), 58-64. doi: 10.11648/j.ijber.20190802.13

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AMA Style

Joseph Chukwudi Odionye, Okanta Sunday Ukeje, Augustine Chika Odo. Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks. Int J Bus Econ Res. 2019;8(2):58-64. doi: 10.11648/j.ijber.20190802.13

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@article{10.11648/j.ijber.20190802.13,
  author = {Joseph Chukwudi Odionye and Okanta Sunday Ukeje and Augustine Chika Odo},
  title = {Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks},
  journal = {International Journal of Business and Economics Research},
  volume = {8},
  number = {2},
  pages = {58-64},
  doi = {10.11648/j.ijber.20190802.13},
  url = {https://doi.org/10.11648/j.ijber.20190802.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20190802.13},
  abstract = {Motivated by the prevalence of misleading inference in time series occasioned by failure to account for structural breaks in series as volatile as oil price in Nigerian specific studies, this study sought to find out whether structural breaks matter in studying the response of inflation to oil price shocks. The study employed Zivot-Andrews unit root test with structural break to compare the unit root result with the conventional ADF result while the local projection impulse response function (LPIRF) was used to determine the response of inflation dynamics to oil price shocks in Nigeria from 1981 to 2016. The unit root test shows that failure to account for structural break in unit root of a volatile series can produce wrong inference. The LPIRF results suggestedthat inflation responds significantly to oil price shocks and that there exists a higher persistence level of oil price shocksin exchange rate than inflation. Furthermore, the counterfactual result conditioned on global oil market behavior shows that inflation responds significantly to oil price due to global oil market behavior.},
 year = {2019}
}

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TY  - JOUR
T1  - Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks
AU  - Joseph Chukwudi Odionye
AU  - Okanta Sunday Ukeje
AU  - Augustine Chika Odo
Y1  - 2019/05/17
PY  - 2019
N1  - https://doi.org/10.11648/j.ijber.20190802.13
DO  - 10.11648/j.ijber.20190802.13
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 58
EP  - 64
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20190802.13
AB  - Motivated by the prevalence of misleading inference in time series occasioned by failure to account for structural breaks in series as volatile as oil price in Nigerian specific studies, this study sought to find out whether structural breaks matter in studying the response of inflation to oil price shocks. The study employed Zivot-Andrews unit root test with structural break to compare the unit root result with the conventional ADF result while the local projection impulse response function (LPIRF) was used to determine the response of inflation dynamics to oil price shocks in Nigeria from 1981 to 2016. The unit root test shows that failure to account for structural break in unit root of a volatile series can produce wrong inference. The LPIRF results suggestedthat inflation responds significantly to oil price shocks and that there exists a higher persistence level of oil price shocksin exchange rate than inflation. Furthermore, the counterfactual result conditioned on global oil market behavior shows that inflation responds significantly to oil price due to global oil market behavior.
VL  - 8
IS  - 2
ER  -

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Author Information

Joseph Chukwudi Odionye

Department of Economics, Faculty of Business Administration, Abia State University, Uturu, Nigeria
Okanta Sunday Ukeje

Department of Banking and Finance, Faculty of Business Administration, Abia State University, Uturu, Nigeria
Augustine Chika Odo

Department of Economics, Faculty of Management and Social Sciences, Godfrey Okoye University, Enugu, Nigeria

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Plain Text BibTeX RIS

APA Style

Joseph Chukwudi Odionye, Okanta Sunday Ukeje, Augustine Chika Odo. (2019). Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks. International Journal of Business and Economics Research, 8(2), 58-64. https://doi.org/10.11648/j.ijber.20190802.13

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ACS Style

Joseph Chukwudi Odionye; Okanta Sunday Ukeje; Augustine Chika Odo. Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks. Int. J. Bus. Econ. Res. 2019, 8(2), 58-64. doi: 10.11648/j.ijber.20190802.13

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AMA Style

Joseph Chukwudi Odionye, Okanta Sunday Ukeje, Augustine Chika Odo. Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks. Int J Bus Econ Res. 2019;8(2):58-64. doi: 10.11648/j.ijber.20190802.13

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@article{10.11648/j.ijber.20190802.13,
  author = {Joseph Chukwudi Odionye and Okanta Sunday Ukeje and Augustine Chika Odo},
  title = {Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks},
  journal = {International Journal of Business and Economics Research},
  volume = {8},
  number = {2},
  pages = {58-64},
  doi = {10.11648/j.ijber.20190802.13},
  url = {https://doi.org/10.11648/j.ijber.20190802.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20190802.13},
  abstract = {Motivated by the prevalence of misleading inference in time series occasioned by failure to account for structural breaks in series as volatile as oil price in Nigerian specific studies, this study sought to find out whether structural breaks matter in studying the response of inflation to oil price shocks. The study employed Zivot-Andrews unit root test with structural break to compare the unit root result with the conventional ADF result while the local projection impulse response function (LPIRF) was used to determine the response of inflation dynamics to oil price shocks in Nigeria from 1981 to 2016. The unit root test shows that failure to account for structural break in unit root of a volatile series can produce wrong inference. The LPIRF results suggestedthat inflation responds significantly to oil price shocks and that there exists a higher persistence level of oil price shocksin exchange rate than inflation. Furthermore, the counterfactual result conditioned on global oil market behavior shows that inflation responds significantly to oil price due to global oil market behavior.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - Oil Price Shocks and Inflation Dynamics in Nigeria: Sensitivity of Unit Root to Structural Breaks
AU  - Joseph Chukwudi Odionye
AU  - Okanta Sunday Ukeje
AU  - Augustine Chika Odo
Y1  - 2019/05/17
PY  - 2019
N1  - https://doi.org/10.11648/j.ijber.20190802.13
DO  - 10.11648/j.ijber.20190802.13
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 58
EP  - 64
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20190802.13
AB  - Motivated by the prevalence of misleading inference in time series occasioned by failure to account for structural breaks in series as volatile as oil price in Nigerian specific studies, this study sought to find out whether structural breaks matter in studying the response of inflation to oil price shocks. The study employed Zivot-Andrews unit root test with structural break to compare the unit root result with the conventional ADF result while the local projection impulse response function (LPIRF) was used to determine the response of inflation dynamics to oil price shocks in Nigeria from 1981 to 2016. The unit root test shows that failure to account for structural break in unit root of a volatile series can produce wrong inference. The LPIRF results suggestedthat inflation responds significantly to oil price shocks and that there exists a higher persistence level of oil price shocksin exchange rate than inflation. Furthermore, the counterfactual result conditioned on global oil market behavior shows that inflation responds significantly to oil price due to global oil market behavior.
VL  - 8
IS  - 2
ER  -

Copy | Download