An Assessment of the Exchange Rate Pass-Through in Angola and Nigeria

Abstract

This paper estimates the exchange rate pass-through to consumer price inflation in Angola and Nigeria, with particular emphasis on the changes of the pass-through over time. Even though the two countries share smilar dependence on oil exports, this paper reveals different results. For Angola, the long-run exchange rate pass-through to prices is high, though it has weakened in recent years reflecting the de-dollarization of the economy. In Nigeria, there is no stable long-run relationship between the exchange rate and prices, and changes in the exchange rate do not have a significant pass-through effect on inflation. However, the passthrough effect on core inflation is significant.

Revisiting the Exchange Rate Pass‐Through to Inflation in Africa’s Two Largest Economies: Nigeria and South Africa

“…Our findings also fail to align with Omisakin () and Lariau et al . (), who claim that there is no evidence of pass‐through in the long run for Nigeria. More importantly, our results on South Africa confirm the proposition that the size of the pass‐through has significantly declined along the price chains as suggested by Ocran (), Jooste and Jhaveri (), Dube (), and Kabundi and Mlachila () for South Africa in the long run.…”

Exchange rate pass‐through to restaurant and hotel prices in the United States: The role of energy prices and tourism development

“…This means that a 1% increase in LNTRD causes restaurants and hotel prices to rise by 0.44%. The result of the negative effective of NEER echoes Lariau, El‐Said, and Takebe (2016) who found that appreciation of exchange rate reduces aggregate domestic prices in Nigeria and South Africa. This finding also agrees with Usman and Musa (2018) who documented that exchange rate movements significantly influence aggregate domestic prices in Nigeria.…”

Does the pass‐through of exchange rate and globalization validate the rockets and feathers hypothesis in Nigeria? Evidence from a nonlinear model

“…A large body of the empirical literature on ERPT has flourished in Nigeria's context, particularly in the new millennium. However, the findings from most empirical studies support the proposition that the pass‐through of exchange rate to domestic prices is incomplete, especially in the short term (Balcilar, Usman, & Agbede, 2019; Campa et al, 2004; Gagnon & Ihrig, 2004; Lariau et al, 2016). The macroeconomic explanation to incomplete pass‐through is linked to nominal rigidities, which cause prices not to respond to a change in exchange rate in the short run (Bailliu & Fujii, 2004; Bhundia, 2002; Campa & Goldberg, 2002; Choudhri & Hakura, 2003; Junttila & Korhonen, 2012).…”

“…This issue has remained one of the key interests of the governments and policymakers especially in an open economy where the bilateral exchange rate variation is high. From both theoretical and empirical viewpoints, exchange rate variation is connected closely to prices (see Adolfson, 2001; Balcilar, Roubaud, Usman, & Wohar, 2019; Campa, Goldberg, & González‐Mínguez, 2004; Devereux & Engel, 2003; Gagnon & Ihrig, 2004; Lariau, El‐Said, & Takebe, 2016; McCarthy, 2000; Taylor, 2000; Xu & Bernhofen, 1999). In Nigeria, between 1985 and 1993, the currency depreciated on average of 71% annually based on the official exchange rate, while in the parallel market, the average depreciation amounted to 114%.…”