Journal of Emerging Trends in Economics and Management Sciences: Home

Abstract:
This paper was motivated by the need to establish the impact of importation into Nigeria and its main objectives were to find out the significant relationships between the official and parallel exchange rates and the consumer price index (CPI). It also established that import ratio in the economy is a contributor to the increase in the cost of living (CPI) in the country. The paper adopted the techniques of correlation and Granger causality to find the significance of the relationships between the index and the exchange rates. It found out that there is higher positive relationship between the ratio of imports and the index than exist between the parallel and official rates. The coefficient between autonomous exchange rates and the consumer price index (CPI) is less significant than official rate, while the import ratio in the economy shows a near two-way balance causality with the consumer price index. The more significant one is causality is that import ratio granger causes CPI. The paper recommends a more liberalised foreign exchange market to reduce the impact of the parallel market and increase in domestic production of consumables to reduce importation of domestically substitutable goods in the economy

Keywords: Consumer Price Index, Official Exchange Rates, Parallel Exchange Rates, Import Ratio, Granger Causality

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