Browsing by Author "Oyinlola, M. A."

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An Empirical Re-examination of Exchange Rate-Trade Balance Nexus in Nigeria
(African Journal Online (AJOL), 2013) Oyinlola, M. A.; Omisakin, O. A.; Adeniyi, O. A.
The Nigerian exchange rate-trade balance nexus was re-examined. The long run relationship between these variables was explored using the Gregory-Hansen cointegration approach on a data sample between 1980:Q1 and 2010:Q4. Prior to this, three efficient integration tests that can overcome potentially severe finite sample power and size problems suffered by the standard methods were tactfully pursued for robustness. The short run impact analysis was done in the error correction framework. The analyses showed that exchange rate depreciation led to trade balance deterioration in both the short run and the long run. Thus, this study could not find support for J-curve in Nigeria. Some suggestions on the way forward were put forth.
Empirical Exposition of Monetary Policy under Fixed and Managed Float Exchange Rate Regime: Any Lesson for Nigeria
(Central bank of Nigeria, 2014) Egwaikhide, F. O.; Oyinlola, M. A.; Adeniyi, O. A.; Olanipekun, D. B.
This paper empirically investigated the relationship between monetary aggregates and the exchange rate under alternative exchange rate regimes in Nigeria. Using data spanning 1961 to 2013 to estimate vector auto-regressive (VAR) models, a number of findings ensued. One, the impulse response functions (IRFS) showed that monetary aggregates were responsive to exchange rate shocks. However, this effect was found to be closely linked with the underlying exchange rate regime. Two, the variance decompositions (VDs) indicated that exchange rate shocks had no significant weight as there was no impact recorded on inflation, interest rate and money supply after one year under the fixed regime. Third, the corresponding VDs under the flexible regime showed that the effect of exchange rate on the monetary aggregates was more significant, especially in the long-run. A key policy implication of the foregoing results was that domestic economic management policies should be proactively orchestrated to better align the objectives of exchange rate policy with broader macroeconomic goals.
Financial System Development and Economic Growth in Sub-Saharan Africa
(West African Institue of Financial Economic Managemnt, 2016) Egwaikhide, F. O.; Oyinlola, M. A.; Omisakin, O.; Adeniyi, O. A
This paper contributes to the age-old debate on the link between financial development and economic growth by examining the role of monetary policy. There is a possibility that monetary policy enhances financial system performance with attendant impact on growth. To unveil this influence, this paper employs fixed effects and System GMM on data from 28 sub-Saharan African countries over the period 1996 to 2014. Results from the baseline estimation using fixed effects indicate that financial development indicators are negatively and significantly associated with growth for two of the three measures used (LGDP and PGDP), while money growth is positively related albeit insignificantly. The results largely remain the same on interaction with money growth. The coefficients of the interactive terms though largely negative are, however, not significant. The results from System GMM presents a different outcome. First, all measures of financial development turn out positive (except BBD) and insignificant. Financial development equally turns negative but insignificant after interacting with money growth. Overall, monetary policy measures, together with their interactions with financial development indicators, show up as weak growth predictors if not dampening, suggestive of the plausible independence of the nexus on the actions of monetary authorities in these countries.
Foreign Direct Investment, Economic Growth and Financial Sector Development in Small Open Developing Economies
(Elsevier B. V., 2012) Adeniyi, O. A.; Omisakin, O.; Egwaikhide, F. O.; Oyinlola, M. A.
The present paper examines the causal linkage between foreign direct investment (FDI) and economic growth - in Cote d'Ivoire, Gambia, Ghana, Nigeria and Sierra Leone - with financial development accounted for over the period 1970-2005 within a trivariate framework which applies Granger causality tests in a vector error correction (VEC) setting. Three alternative measures of financial sector development - total liquid liabilities, total banking sector credit and credit to the private sector - were employed to capture different ramifications of financial intermediation. Our results support the view that the extent of financial sophistication matters for the benefits of foreign direct investment to register on economic growth in Ghana, Gambia and Sierra Leone depending on the financial indicator used. Nigeria, on the other hand, displays no evidence of any short- or long-run causal flow from FDI to growth with financial deepening accompanying. In sum, therefore, what should be of utmost urgency is concerted efforts in most of these countries, which have typically been in the throes of economic reforms, to upgrade their financial structure to better position them to reap the desirable growth promoting effects of FDI flows.
Impact of Oil Price Shocks on the Macroeconomy: Evidence from Nigeria.
(West African Institute for Financial and Economic Management (WAIFEM),, 2014) Adeniyi, O. A.; Egwaikhide, F. O.; Oyinlola, M. A.
The role of oil price shocks in the movements of key macroeconomic fundamentals such as output and inflation has been the focal point of many empirical enquiries. However, earlier studies on the oil price- output-inflation relationship in Nigeria hardly took an explicit account of potential non-linearities. This study, therefore, investigated the impact of oil price shocks on output and inflation in Nigeria between 1970 and 2006. A macroeconometric model which captured both the direct and indirect relationships between oil price shocks, output and inflation, was employed. Three alternative measures of oil price shocks namely linear, asymmetric and volatility were considered. The behavioural equations were estimated using the three-stage-least-squares technique and a general-to specific procedure was used to minimise the loss of valuable information. The linear benchmark model showed that the effect of oil price shocks on inflation was moderately important, while the effect on output was not significant. Specifically, in response to a doubling of oil price, output rose by 0.20% and it resulted in a 0.25% decline in inflation. The results of the asymmetric model indicated that a 100% increase in oil price would cause output to rise by 0.57%, but it would decline by only 0.13% following an oil price reduction of the same order of magnitude. The volatility measure showed that doubling the oil price would raise output by 0.45% and inflation would increase by 0.15%. The estimated results suggested that oil price shocks had trifling impact on output, while it appeared to have slight effect on inflation. This implied that the enclave nature of the oil sector and its weak linkages with the rest of the economy as well as better management via sterilisation may have moderated the effect of oil price shocks on both output and inflation respectively.
Natural Resource Abundance, Institutions and Economic Growth in Africa
(Inderscience Enterprises LTD, 2015) Oyinlola, M. A.; Adeniyi, O. A.; Raheem, I. D.
The study analysed the effect of institution on resource curse abundance-economic growth nexus using the system generalised method of moments. The empirical results refute the resource curse hypothesis in Africa. In addition, institutions have dampening effect on the nexus. This stems from the fact that the institutional development level of most African countries is weak. The study also found out that the resource curse hypothesis is not peculiar to oil wealth as indicated in the literature. Lastly, our results do not support the rentier effect as a possible channel of the hypothesis.
Oil Price Shocks and Economic Growth in Nigeria: Are Thresholds important?
(John Wiley & Sons Inc, 2011) Adeniyi, O. A.; Omisakin, O. A.; Oyinlola, M. A.
The impact of oil price shocks on the economy has occupied the attention of researchers for almost four decades. Majority of studies support the existence of a negative association, while some recent evidences seem to have popularised the view that outcomes are the artefacts of misspecified functional forms. This study, although similar in spirit to this popular opinion, is, however, distinct in a number of ways. Firstly, unlike most Nigeria-specific studies, this paper explores alternative measures of oil price shocks, which have been developed and used in the literature with a view to ascertaining the extent to which conclusions about the oil price-growth association depend on the definition of shocks adopted. More importantly, this, to the best of our knowledge, is a pioneer attempt at introducing threshold effects into the linkage between oil price shocks and output growth in Nigeria. The relatively recent regime-dependent multivariate threshold autoregressive model, together with the characteristic impulse response functions and forecast error variance decomposition, is adopted in this study. Using quarterly data spanning 1985–2008, a non-linear model of oil price shocks and economic growth is estimated. Our main results indicate that oil price shocks do not account for a significant proportion of Observed movements in macroeconomic aggregates. This pattern persists despite the introduction of threshold effects. This implied the enclave nature of Nigeria’s oil sector with weak linkages. Therefore, the need to spend oil revenue productively is imperative if favourable effect on real output growth is envisaged.
Oil Price Shocks and Economic Growth in Nigeria: Are Thresholds important?
(John Wiley & Sons Inc., 2011) Adeniyi, O. A.; Omisakin, O. A.; Oyinlola, M. A.
The impact of oil price shocks on the economy has occupied the attention of researchers for almost four decades. Majority of studies support the existence of a negative association, while some recent evidences seem to have popularised the view that outcomes are the artefacts of misspecified functional forms. This study, although similar in spirit to this popular opinion, is, however, distinct in a number of ways. Firstly, unlike most Nigeria-specific studies, this paper explores alternative measures of oil price shocks, which have been developed and used in the literature with a view to ascertaining the extent to which conclusions about the oil price-growth association depend on the definition of shocks adopted. More importantly, this, to the best of our knowledge, is a pioneer attempt at introducing threshold effects into the linkage between oil price shocks and output growth in Nigeria. The relatively recent regime-dependent multivariate threshold autoregressive model, together with the characteristic impulse response functions and forecast error variance decomposition, is adopted in this study. Using quarterly data spanning 1985–2008, a non-linear model of oil price shocks and economic growth is estimated. Our main results indicate that oil price shocks do not account for a significant proportion of Observed movements in macroeconomic aggregates. This pattern persists despite the introduction of threshold effects. This implied the enclave nature of Nigeria’s oil sector with weak linkages. Therefore, the need to spend oil revenue productively is imperative if favourable effect on real output growth is envisaged.
Oil Price Shocks and Economic Growth in Nigeria: Are Thresholds important?
(John Wiley & Sons Inc., 2011) Adeniyi, O. A.; Omisakin, O. A.; Oyinlola, M. A.
The impact of oil price shocks on the economy has occupied the attention of researchers for almost four decades. Majority of studies support the existence of a negative association, while some recent evidences seem to have popularised the view that outcomes are the artefacts of misspecified functional forms. This study, although similar in spirit to this popular opinion, is, however, distinct in a number of ways. Firstly, unlike most Nigeria-specific studies, this paper explores alternative measures of oil price shocks, which have been developed and used in the literature with a view to ascertaining the extent to which conclusions about the oil price-growth association depend on the definition of shocks adopted. More importantly, this, to the best of our knowledge, is a pioneer attempt at introducing threshold effects into the linkage between oil price shocks and output growth in Nigeria. The relatively recent regime-dependent multivariate threshold autoregressive model, together with the characteristic impulse response functions and forecast error variance decomposition, is adopted in this study. Using quarterly data spanning 1985–2008, a non-linear model of oil price shocks and economic growth is estimated. Our main results indicate that oil price shocks do not account for a significant proportion of Observed movements in macroeconomic aggregates. This pattern persists despite the introduction of threshold effects. This implied the enclave nature of Nigeria’s oil sector with weak linkages. Therefore, the need to spend oil revenue productively is imperative if favourable effect on real output growth is envisaged.
Oil Price Shocks and the Macroeconomy: Chronicles of Theory and Empirics
(Centre for Petroleum, Energy Economics & Law (CPEEL), 2016) Adeniyi O. A.; Orekoya S. O.; Oyinlola, M. A.; Omisakin, O.
Understanding energy-economy interactions has occupied the attention of academics and policymakers for several decades. The preponderance of empirical attempts in this sphere has focused on the impact of oil price shocks on the aggregate economy in both developed and developing economies. This expansive literature has undoubtedly produced diverse and often conflicting results. In this paper, we therefore provide a survey of this vast literature on the oil shocks-macroeconomy relationship. In particular, we carefully document a considerably elaborate account of both the theoretical propositions as well as empirical exercises in this literature especially over the last three decades on the relationship in question. The core idea behind the foregoing is the hope that this will help both academic researchers and policymakers in the quest for a better understanding of the oil price-macroeconomy nexus particularly in resource dependent settings.
Purchasing Power Parity: Further Evidence from African Countries
(Dr. Mohammad A. Wadud, 2011) Oyinlola, M. A.; Adeniyi, O. A.; Egwaikhide, F. O.
In this paper we pursue an empirical enquiry into the validity of an equilibrium absolute purchasing power parity (PPP) for a sample of 26 economies in Africa. Using univariate as well as panel unit root tests on yearly observations spanning 1973 to 2008, we uncover evidence that the PPP notion holds in just a little over one third of the countries selected and breaks down on average when the latter class of tests are employed. In sum, non-linear modelling of exchange rate convergence to its PPP trajectory could foster understanding on the subject.
Purchasing Power Parity: Further Evidence from African Countries
(Dr. Mohammad A. Wadud, 2011) Oyinlola, M. A.; Adeniyi, O. A.; Egwaikhide, F. O.
In this paper we pursue an empirical enquiry into the validity of an equilibrium absolute purchasing power parity (PPP) for a sample of 26 economies in Africa. Using univariate as well as panel unit root tests on yearly observations spanning 1973 to 2008, we uncover evidence that the PPP notion holds in just a little over one third of the countries selected and breaks down on average when the latter class of tests are employed. In sum, non-linear modelling of exchange rate convergence to its PPP trajectory could foster understanding on the subject.
Responsiveness of Trade Flows to Changes in Exchange rate and Relative prices: Evidence from Nigeria
(Eastern Macedonia and Thrace Institute of Technology, 2010) Oyinlola, M. A.; Adeniyi, O. A.; Omisakin, O.
This paper examines the long-run and short-run impacts of exchange rate and price changes on trade flows in Nigeria using exports and imports functions. The bounds testing (ARDL) approach to cointegration is applied on a quarterly data from 1980Q1 to 2007Q4. The results indicate that in both the short-run and long-run Nigeria’s trade flows are chiefly influenced by income- both domestic and foreign-, relative prices, nominal effective exchange rates and the stock of external reserves. The results also reveal that in the long-run, devaluation is more effective than relative prices in altering imports demand at both baseline and augmented models. The reverse is, however, the case for exports demand. Furthermore, the sum of the estimated price elasticities of export and import demand in Nigeria exceeds unity indicating that the Marshall-Lerner (ML) condition holds thus implying that a devalued naira might hold considerable promise as the panacea to rising trade deficits.
Responsiveness of Trade Flows to Changes in Exchange rate and Relative prices: Evidence from Nigeria
(Eastern Macedonia and Thrace Institute of Technology, 2010) Oyinlola, M. A.; Adeniyi, O. A.; Omisakin, O.
"This paper examines the long-run and short-run impacts of exchange rate and price changes on trade flows in Nigeria using exports and imports functions. The bounds testing (ARDL) approach to cointegration is applied on a quarterly data from 1980Q1 to 2007Q4. The results indicate that in both the short-run and long-run Nigeria’s trade flows are chiefly influenced by income- both domestic and foreign-, relative prices, nominal effective exchange rates and the stock of external reserves. The results also reveal that in the long-run, devaluation is more effective than relative prices in altering imports demand at both baseline and augmented models. The reverse is, however, the case for exports demand. Furthermore, the sum of the estimated price elasticities of export and import demand in Nigeria exceeds unity indicating that the Marshall-Lerner (ML) condition holds thus implying that a devalued naira might hold considerable promise as the panacea to rising trade deficits."
Structural Breaks, Parameter Stability and Energy Demand Modelling in Nigeria
(Eastern Macedonia and Thrace Institute of Technology, 2012) Omisakin, O.; Adeniyi, O. A.; Oyinlola, M. A.
This paper extends previous studies in modeling and estimating energy demand functions for both gasoline and kerosene petroleum products for Nigeria from 1977 to 2008. In contrast to earlier studies on Nigeria and other developing countries, this study specifically tests for the possibility of structural breaks/regime shifts and parameter instability in the energy demand functions using more recent and robust techniques. In addition, the study considers an alternative model specification which primarily captures the price-income interaction effects on both gasoline and kerosene demand functions. While the conventional residual-based cointegration tests employed fail to identify any meaningful long run relationship in both functions, the Gregory- Hansen structural break cointegration approach confirms the cointegration relationships despite the breakpoints. Both functions are also found to be stable under the period studied. The elasticity estimates also follow the a priori expectation being inelastic both in the long- and short run for the two functions.
The Dynamics of Stock Prices and Exchange Rate: Evidence from Nigeria
(West African Monetary Institute, 2012) Oyinlola, M. A.; Adeniyi, O. A.; Omisakin, O.
This paper probed the long-run and short-run dynamics between stock prices and exchange rates in Nigeria using the Johansen and Gregory-Hansen cointegration analyses, causality test and Exponentional General Autoregressive Conditional Heteroskedasticity modeling on daily data from January 2, 2002 to August 11, 2011.The results showed that there is no long run relationship between stock prices and exchange rate in Nigeria, albeit, with a structural break date of mid April 2007, which coincides with the period when the stock prices plumped precipitously from the impact of global financial crisis in early 2007. In addition, the results indicated that there is a unidirectional relationship from stock prices to exchange rate and that the EGARCH modeling suggested that a 100% increase in stock prices would lead to a 1.66% appreciation of the exchange rate. Thus, it is imperative for monetary authorities in Nigeria to take into account the role of stock market development in the conduct of its exchange rate policy.