Exchange Rate –Oil Price Nexus: The Role of Asymmetries

Abstract

Using the case of the Nigerian economy, this paper utilize both the linear and nonlinear ARDL frameworks to investigate the short and long run symmetric and asymmetric response of exchange rate to oil price changes. We fail to reject the null hypothesis of no asymmetry though, the fact that the empirical evidence as established in the context of this study reveals the response of exchange rate to oil price shocks as more significantly pronounced when the changes in oil price is positive is quite instructive not to entirely ignores possible asymmetric implications of exchange rate –oil price relationship in Nigeria.

JEL Classification: C22, F30, F31

Keywords: Oil price; Exchange rates; Asymmetries; Nonlinear ARDL