Impact of oil price shock on foreign currency and stock markets: The Nigeria perspective

Osabuohien-Irabor Osa

Abstract


With the incorporation of the Constant Correlation (CC) model to the AR-MEGARCH models, the returns and Volatility spillover effects of foreign exchange rates (Naira/USD and Naira/GBP exchange rates), the Nigerian Stock Exchange (NSE-30), and the price of crude oil (West Texas Intermediate (WTI)), from April 2nd, 2012 to April 30th, 2015 was examined. From the empirical analyses, it was found that there is absence of leverage effects in the price of crude oil. Investigation also reveals that there is a uni-directional spillover of oil shocks to the Naira/USD exchange rate but a transmission of shock from the Naira/GBP exchange rate to the price of crude oil (WTI) was found. Analysis also reveals that there is persistence of volatility in all the four markets considered in this study. In the Nigeria perspective, this paper also contributes to the scarce literature of multivariate volatility spillover effects among the different markets considered in this study


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