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EFFECTS OF OIL PRICE MOVEMENT ON NIGERIAN MACROECONOMIC VARIABLES: EVIDENCE FROM LINEAR NEAR AND NONLINEAR ARDL MODELLING
Abstract
The price movement on critical macroeconomic variables (output, price he study seeks to investigate both linear and nonlinear effects of oil and exchange rate) in Nigeria using ARDL modeling approach. Previous studies substantially relied on linear methods using VAR approach to unravel this links without a clear conclusion. In an attempt to seek better results in this study, we employ both linear and nonlinear ARDL modeling techniques that inherently allows for asymmetric effect. Based on the theoretical proposition of ARDL methods that does require that all data are either stationary at level or at first difference or the combination of the two. We perform unit root tests and other required econometrics tests. Consequently, linear and nonlinear ARDL estimation techniques were carried out. The results from linear and non-linear estimations indicate that oil price movement has statistical significant effects on critical macroeconomic variables in Nigeria (output, price and exchange rate) both in the short-run and long-run but there is evidence of asymmetric effect for output and exchange rate only. Therefore the study concludes there is no asymmetric effect of oil price movement on general price level in Nigeria but there are statistically significant asymmetric effects of oil price movement on output and exchange rate in the country.
Keywords: Macroeconomics, NARDL, Shock and Price. JEL Classification: C00, C55, E32, E31.