IBADAN JOURNAL OF THE SOCIAL SCIENCES

Ibadan Journal of the Social Sciences
Volume 11, No. 2, 2013
DOI: 10.36108/ijss/3102.11.0210

International Reserve and Oil Price Movement: Evidence from Nigeria

Abiodun S. Bankole and Mohammed I. Shuaibu

Department of Economics & Trade Policy Research and Training Programme, University of Ibadan, Ibadan, Nigeria

Abstract

The impact of oil price changes 011 aggregate economic activities has been a focal point of research since the 1970s and the research has often produced mixed results. For a small, open oil-exporting country like Nigeria, the effect of oil price changes is expected to be strong on international reserves accumulation. This paper examines the relationship within the Mundell-Fleming framework with special focus on Nigeria. Using a Vector Autoregressive (VAR) Model, this study explores the linkage over the period 1960-2011 and finds that oil price affected reserve holding in the long-run with relatively minimal effects in the short-run. While results of the impulse response functions showed that oil price affected external reserve holding. variance decomposition analysis revealed a marginal impact.
Keywords: Reserves, Vector Autoregression (VAR), Interest Rate, Inflation, Impulse Response Function, Forecast Error Variance Decomposition

 

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