Dollarization, Inflation and Interest Rate in Nigeria

Authors

David O. Olayungbo, Obafemi Awolowo UniversityFollow
Kehinde T. AjuwonFollow

Keywords

Dollarization, Inflation, Interest rate, SVAR, Nigeria

Abstract

This paper investigates the relationship among dollarization, inflation and interest rate in Nigeria for the period 1986-2015Q1. It adopts inter-temporal model of money-in-utility (MIU) with an estimation technique of structural vector autoregression (SVAR). Empirical evidence shows that dollarization index has been on the increase in Nigeria since 1994, despite stable and low inflation and interest rate. Results of the cointegration show long run equilibrium among dollarization, inflation and interest rate. The Granger causality test reveals that there is a unidirectional relationship from dollarization to inflation in Nigeria. This suggests that policies that aim to reduce inflation in Nigeria must include measures that specifically address the issue of dollarization.

Author Bio

1.Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria. Phone no: +2348035342586 E-mail address: doolayungbo@oauife.edu.ng, yinkadavey2k@yahoo.co.uk

2.Akintola Williams Deloitte, House 235, Ikorodu Road, Ilupeju, Lagos, Nigeria. Phone no:+2347032505208 E-mail address: tayok78@yahoo.com

Publication Title

CBN Journal of Applied Statistics

Issue

1(b)

Volume

6

Recommended Citation

Olayungbo, David O. and Ajuwon, Kehinde T. (2015) "Dollarization, Inflation and Interest Rate in Nigeria," CBN Journal of Applied Statistics (JAS): Vol. 6: No. 1, Article 12.
Available at: https://dc.cbn.gov.ng/jas/vol6/iss1/12