Ibadan Journal of the Social Sciences
Volume 7, No. 1, 2009
Pages 55-67
DOI: 10.36108/ijss/9002.70.0150
ls Exchange Rate Pass-through to Import Prices in Nigeria A Short-run Phenomenon?
I.D. Poloamina
M. Adetunji Babatunde
M. Abimbola Oyinlola
Department of Economics, University of Ibadan, Nigeria
Abstract
The study examines the extent of exchange rate pass-through into import prices for Nigeria between 1980 and 2006. The recently developed Unrestricted Error Connection Model (UECM) – Bounds test proposed by Pesaran et al. (2001) was adopted. A price model that recognized the developments in the tradable and non-tradable sectors of the economy was used. At the aggregate level, exchange rate pass-through to import prices was found to be complete. However, only the short-run effect of exchange rate pass through was evident, but occurred with a lag. There was, however, no long-run relationship among the variables. In the short run, a 1% depreciation of the exchange rate led to 1% increase in import prices. In addition, the immediate past values of world export price and tariff rate explains some of the variation in import prices in Nigeria.
Keywords: exchange rate, pass-through, short-run