THE INTERDEPENDENCE OF CRUDE OIL PRICES ON EXCHANGE RATES IN NIGERIA: TIME SERIES APPROACH
Akwapoly Journal of Communication and Scientific Research (APJOCASR)
Keywords:
Interdependence, Pre-whitening, Cross-Correlation, Residuals , differencingAbstract
This paper focused on the interdependence of crude oil prices on exchange rates using monthly crude oil prices and naira to the United States dollar exchange rate extracted from the Central Bank of Nigeria statistical bulletin for sixteen (2006-2021) years constituting vector time series. Each of the components of the vector time series was made stationary by differencing, and the stationary vector time series was subjected to pre-whitening to determine the interaction between crude oil prices and naira to the United States dollar exchange rate using sample cross-correlation of the residuals obtained by fitting autoregressive integrated moving average models to the stationary processes. The results revealed that the residual series are not correlated at lag 0 while the cross-correlation at other lags except lag 1 is within the 95% limits. Hence, there is no interaction between crude oil prices and the exchange rate of naira to USD. The lack of interaction between these variables may be connected to subsidy payments in Nigeria.
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