Abstract:
In this paper, an empirical analysis is used to compare the effects of oil price shock and exchange rate volatility on the economic growth of Nigeria and Kenya. Firstly, a LA-VAR model is applied to investigate whether the oil price shock and exchange rate volatility have the Granger Causality to economic growth of both Nigeria and Kenya. Secondly, we apply a VAR model with co-integration technique to examine how GDP Growth of Nigeria and Kenya are affected by changes in oil prices and the exchange rate in the long-run. Thirdly, a vector error correction model (VECM) is employed to analyze the short-run dynamics of the real GDP Growth for the two countries. Finally, we employed a SURE model in this study to compare the result of oil price shock on international market to GDP Growth of both countries. Our main findings indicate that the oil price shock have effect on GDP Growth of both Nigeria and Kenya. The exchange rate of both countries also has effect on the GDP output of the countries
