Nigerian Statistical Association Logo - A Galaxy of Professional Statisticians
The third edition of the Nigerian Statistical Association Competition for Undergraduate students will commence on the 24th to 30th of July 2022

Volatility, Spillover Effects among Foreign Exchange Rates,Oil Price Fluctuation and the Nigerian Stock Exchange: A Multivariate VAR-EGARCH-CC Analysis


O. Osabuohien-Irabor

JOURNAL: Journal of the Nigerian Statistical Association Vol. 28, 2016
YEAR: 2016


This paper examines the hidden dynamics prices changes and the volatility spillover among foreign exchange market (Naira/USD, Naira/GBP), stock exchange market (NSE-30) and the crude oil market (WTI). The methodology of the study is the fusion of the Constant Correlation (CC) model to the Vector Autoregressive Exponential Generalized Autoregressive Conditional Heteroskedasticity (VAR(1)-EGARCH(1,1)) model, to examine the spillover effects as well as capture the time series stylized facts. This approach is quite different from the popular Koutmos (1996) multivariate EGARCH methodology which may lead to inaccurate parameter estimate due to the imposed constraints. Our findings suggest the existence of leverage effect in the currency market (Naira/USD, Naira/GBP) and in crude oil market. Besides the high persistent of volatility in the currency market (Naira/USD, Naira/GBP) and the stock market (NSE-30), there is also dominance of shocks in the local market. This paper will be of immense benefit to the practitioner, academic scholars and policies makers on the inter-relationship among these variables.


Adedipe, B. (2004). The impact of oil on Nigeria's economic policy formulation. Maximizing pro-poor growth: regenerating the socio-economic database. Overseas Development Institute in collaboration with the Nigeria Economic Summit Group, 16th 17th June 2004 (number of pages).

Ademola, O. and David, O.W. (2011). Exchange rate volatility: an analysis of the relationship between the Nigerian naira's oil prices and US dollars. Master thesis in International Mangement, Gotland University, Sweden.

Adjasi, C. K.D., and Biekpe, B. N. (2005). Stock market returns and exchange rate dynamics in selected African countries: A bivariate analysis. The African Finance Journal,(Vol., number & number of pages).

Afeez A. S. and Mobolaji H. (2013). Modeling returns and volatility transmission between oil price and USNigeria exchange rate. Elsevier Journal of Energy Economics, 39: 169 -176

Baillie, R. T. and Bollerslev, T. (1989). The message in daily exchange rate: a conditional variance tale. Journal of Business and Economic Statistics, 7: 297 - 305.

Bollerslev, T. (1990). Modelling the coherence in short-run nominal exchange rates: a multivariate generalized ARCH model. Review of Economics and Statistics, 72(3): 498 -505.

Central Bank of Nigeria (2008). Statistical Bulletin. Annual publication of Central Bank of Nigeria, Vol.18 (number of pages).

Dahiru A. B. and Joseph O. A. (2013). Exchange-rate volatility in Nigeria: application of GARCH models with exogenous break. CBN Journal of Applied Statistics, 4(1) (number of pages)

Diebold, F. X., and Nerlove, M. (1989). The dynamics of exchange rate volatility: a multivariate latent factor ARCH model. Journal of Applied Econometrics, 4: 1-21.

Engle, R. F. and Bollerslev, T. (1986). Modeling the persistence of conditional variances. Econometric Review, 5: 1-50.

Engle, R. F. (1995). ARCH: Selected Readings. New York: Oxford University Press.

Engle, R.F. and Ng, V. (1993). Measuring and testing the impact of news on volatility. Journal of Finance, 48: 1749-1778.

Golub, S. S. (1983). Oil prices and exchange rates. The Economic Journal, 93: 576-593.

Grasa, A.A. (1989). Econometric Model Selection: A New Approach. New York:Springer.

Hamilton, J. D. (1983). Oil and the macroeconomy since World War II. Journal of Political Economy, 91: 228-248.

Hamilton, J. D. (1994). Time Series Analysis. New Jersey: Princeton University Press.

Hammoudeh, S., and Choi, K. (2006). Behavior of GCC stock markets and impacts

of US oil and nancial markets. Research in International Business and Finance, 20: 22-44.

Isakov, D. and Perignon, C. (2000). On the dynamic interdependence of international stock markets: a Swiss perspective. Swiss Journal of Economics and Statistics,(Volume & number of pages)

Krugman, P. (1983). Oil Shocks and Exchange Rate Dynamics. University of Chicago Press (place of publication).

Maghyereh, A., (2004). Oil price shocks and emerging stock markets: a generalized VAR approach. International Journal of Applied Econometrics and Quantitative Studies,1: 27- 40.

Neaime, S., (2012). The global financial crisis, financial linkages, and correlations in returns and volatility in emerging MENA Stock Markets. Emerging Markets Review, 13(3):268-282.

Nelson, D. B. (1990). Stationarity and persistence in the GARCH(1,1) model. Econometric Theory, 6(3): (number of pages)

Sadorsky, P. (1999). Oil price shocks and stock market activity. Energy Economics,21: 449-469.

Sim, C. A. (1980). Macroeconomics and reality. Econometrica, 48(1) (number of pages).

Solnik, B., (1987). Using financial prices to test exchange rate models - a note.Journal of Finance, 42: 141-149.

Su, D., and Fleisher, B. M. (1998). Risk, return and regulation in Chinese stock market. Journal of Econometrics and Business, 50: 239-256.

Wakeford J., (2006). The Impact of oil price shocks on the South African macroeconomy: history and prospects in accelerated and shared growth in South Africa: Determinants, Constraints, and Opportunities. (provide publisher & number of pages).

West, K. and Cho, D. (1995). The predictive ability of several models of exchange rate volatility. Journal of Econometrics, 69(2): 367-391.


Our journal is now available to everyone
Download Journal

Journal of the Nigerian Statistical Association Vol. 28, 2016


Privacy Policy Terms of Service © 2024 Nigerian Statistical Association - All Rights Reserved Developed by Masterweb Solutions