Abstract
This study aims to examine the relationship between crude oil price, interest rate and theunemployment rate in Nigeria using times series data for the 1991-2019 periods. Thestationarity property of the series was examined using Augmented Dickey and Fuller(1979) and Elliot, Rothenberg and Stock’s (1996) unit root test. The outcomes ofAugmented Dickey and Fuller indicated a mixture of an order of integration among theseries while Elliot et al.’s (1996) unit root test revealed that all the series are stationary atthe first difference and therefore are said to integrate of order one. The Toda andYamamoto long-run granger causality indicated that one-way causality exists flowingfrom crude oil price to unemployment rate, unemployment rate to interest rate, populationgrowth to the unemployment rate, crude oil price to interest rate and population growthto interest rate alongside two-way causality flowing from population growth to crude oilprice. Therefore, based on the empirical outcomes we recommended that labour will serveas an efficient substituting factor of production for energy and capital in the case of theNigerian economy and Nigerian government should develop both industrial and noncrude oil sectors to create employment opportunities for the unemployed teemingpopulation as well as increasing the country’s export.
Highlights
This study aims to examine the relationship between crude oil price, interest rate and the unemployment rate in Nigeria using times series data for the 1991-2019 periods
The Toda and Yamamoto long-run granger causality indicated that one-way causality exists flowing from crude oil price to unemployment rate, unemployment rate to interest rate, population growth to the unemployment rate, crude oil price to interest rate and population growth to interest rate alongside two-way causality flowing from population growth to crude oil price
The unemployment rate is measured by the total unemployment, the interest rate is measured by lending interest rate expressed in percentage, population growth is measured as population growth expressed in annual percentage and crude oil price is measured in U.S dollar per barrel crude oil market price
Summary
In this research, based on the empirical model of Doğrul and Soytas (2010), our main objective is to investigate the dynamic association between crude oil price, interest rate and unemployment in the case of the Nigerian economy for the sample period of 1991 to 2018. Toda and Yamamoto only necessitates the knowledge of the maximum integration order of the interest variables and to determine the variables’ stationarity properties, we have employed 3 different unit root tests of augmented Dickey and Fuller (1979), Elliot et al (1996) and Breakpoint unit root Where lnUEMt, lnINRt, lnCOPt, and lnPOGt, are the natural logarithms of the unemployment rate, interest rate, crude oil price, and population growth, the optimal lag order is denoted by k, variables maximum order of integration is given by d and π1t... Where lnUEMt, lnINRt, lnCOPt, and lnPOGt, are the natural logarithms of the unemployment rate, interest rate, crude oil price, and population growth, the optimal lag order is denoted by k, variables maximum order of integration is given by d and π1t... π4t are the white noise terms
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