Can agricultural commodity prices predict Nigeria's inflation?

Tule, Moses K.; Salisu, Afees A.; Chiemeke, Charles

doi:10.1016/j.jcomm.2019.02.002

Cited by 41 publications

(25 citation statements)

References 75 publications

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“…In addition, the estimated coefficient after accounting for macroeconomic volatility effect shows a positive and significant impact of global fear index on commodity price returns. These positive results conform with findings in empirical economics and finance literature on the hedging features of commodities including metals such as gold, silver, platinum and palladium ( Chen et al, 2014 ); and agricultural commodities such as coffee and cocoa (see Tule et al, 2019 ). These studies found that investors exploit the wealth protection features of commodities by holding and spreading their investment portfolios from stocks and bonds especially during crisis, such as the COVID-19 pandemic.…”

Section: Resultssupporting

confidence: 85%

The COVID-19 global fear index and the predictability of commodity price returns

Salisu

Akanni

Raheem

2020

Journal of Behavioral and Experimental Finance

Self Cite

167

102

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In this paper, we subject the global fear index (GFI) for the COVID-19 pandemic to empirical scrutiny by examining its predictive power in the predictability of commodity price returns during the pandemic. One of the attractions to the index lies in its coverage as all the countries and by extension regions and territories in the world are considered in the construction of the index. Our results show evidence of a positive relationship between commodity price returns and the global fear index, confirming that commodity returns increase as COVID-19 related fear rises. By way of extension, we further establish that commodity market offers better safe-haven properties than the stock market given the negative association between GFI and the latter. Finally, the GFI series improves the forecast accuracy of the predictive model for commodity price returns and its forecast outcome outperforms the historical average (constant returns) model both for the in-sample and out-of-sample forecasts. Our results are robust to alternative measures of pandemics.

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Section: Resultssupporting

confidence: 85%

The COVID-19 global fear index and the predictability of commodity price returns

Salisu

Akanni

Raheem

2020

Journal of Behavioral and Experimental Finance

Self Cite

167

102

View full text Add to dashboard Cite

show abstract

“…Khan and Ahmed (2014) reveal, by using data from 1990 to 2011, that oil and food price shocks significantly affect inflation rate in Pakistan. Tule et al (2019) show that agricultural commodities prices have a prediction power for headline and food inflation in Nigeria. Rivero and Ramírez (2019) analyze the monetary policy response to the inflation and economic activity changes in Bolivia, and find that interest rates display a sensitive response to output gap and an inelastic mechanism to inflation.…”

Section: Empirical Reviewmentioning

confidence: 99%

The Transmission of Global Commodity Prices to Consumer Prices in a Commodity Import-Dependent Country: Evidence from Morocco

Tarta

Plăiaş

Martinez

et al. 2020

SAEB

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This paper uses the Breitung and Candelon (2006) causality test to examine the effect of global oil and food price changes on the inflation in Morocco over the period from 1998Q1 to 2018Q1. The results show significant transmission from oil and food prices to domestic inflation. Specifically, the food prices are shown more important than oil prices in explaining inflation in the short-run, which reflects the high weight of food in the consumption basket. However, the effect of oil prices on inflation is much more persistent than the effect of food prices. Furthermore, the impact of commodity price shocks on inflation exhibits asymmetries. The oil price hikes affect more weakly the inflation than oil price decreases, whereas the food price increases are more transmitted to inflation than food price decreases. Our findings may provide useful information to researchers and policymakers in formulating more appropriate monetary policy.

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“…The study used the seemingly Unrelated Regression (SUR) model, and Two-Stage Least Squares (2SLS) technique and discovered that the Ricardian Equivalence Hypothesis (REH) holds for both countries. Tule et al (2019), examined the efficacy of fiscal theory of price level in Nigeria using an autoregressive distributed lag model for the period from 2002 Q1 to 2017 Q4. The study tested the hypothesis of Leeper (1991) and Sims (1994) that the price level is not independently determined by the monetary authorities, but rather the extent of the relationship between monetary and fiscal authorities.…”

Section: Theoretical Issues and Review Of Related Literaturementioning

confidence: 99%

Inflationary Impact of Funding Options for Budget Deficits in Nigeria

Martins¹,

Patrick²,

Chioma³

et al. 2021

SJEF

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This paper investigates the inflationary impact of the various financing options for the federal government budget deficit which has accumulated overtime. Using Auto Regressive Distributed Lag (ARDL) methodology and quarterly data over the period 2000Q1 to 2017Q2, the study found significant relationship between inflation and the current financing options of the Government. Overall, the result of our ARDL model affirm that the impact of fiscal spending in Nigeria on inflation is captured more in the short-run since none of the variables is significant in the long-run. In addition, the use of Banking System Financing to fund government deficits has better potentials as the optimal choice because its impact on inflation is insignificant. Federal Government Bonds as a tool for financing budget deficits is also considered an optimal choice because though it causes inflation to rise by the second quarter, but its impact on inflation is expected to fizzle out in the long-run. Ways and Means Advances on the other hand, was shown to have the highest inflationary impact and as such, its use as a tool for financing government deficit should be discouraged. We, therefore, recommend a couple of appropriate policy options for financing budget deficits in Nigeria namely monetary financing and the issuance of federal government bonds. On the policy side, more efficient public expenditure management. Capital market, co-financing arrangements with pension funds and issuance of project-tied bonds, would be beneficial.

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Can agricultural commodity prices predict Nigeria's inflation?

Cited by 41 publications

References 75 publications

The COVID-19 global fear index and the predictability of commodity price returns

The COVID-19 global fear index and the predictability of commodity price returns

The Transmission of Global Commodity Prices to Consumer Prices in a Commodity Import-Dependent Country: Evidence from Morocco

Inflationary Impact of Funding Options for Budget Deficits in Nigeria

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