Measuring the Impact of COVID-19 Pandemic on Inflation in Nigeria Using ARDL Approach

Abstract

Coronavirus also known as COVID -19, is a disease that emerged from China during last quarter of the year 2019. The diseases is a respiratory illness that can spread from person to person. It caused stagnation of many economic activities across the Globe. The economic damage of the pandemic represent the largest economic shock the world experienced in decades since 1930s. During the period of the covid-19 pandemic, Nigeria witnessed persistence increase in general price of goods and services. Thus, the study was carried to examine the relationship between covid-19 infections and inflation using weekly time series data on the variables of study. Auto-Regression Distributed Lag Model (ARDL) was employed to estimate the relation between the inflation and covid-19. The ARDL bound test indicated the absence of cointegration among the variables of study. Consequently, short-run ARDL was estimated and the findings are as follows: there is weak negative but significant relationship between Covid 19 and inflation. Furthermore, exchange rate has a positive and significant impact on inflation. Granger causality test found that covid-19 granger causes inflation. The study therefore concluded that, covid-19 based on literature can cause inflation through its transitory effect and measures especially lockdowns taken by government in the process of curbing the spread of the pandemic. The study recommended that government should be cautions when taking measures to curb a disease or any action that can cause production bottleneck in the economy, and it finally recommended further studies in the area to reveal more results.