RESTRICTED MULTIVARIATE-GARCH) MODEL OF EXCHANGE RATE, INFLATION RATE AND CRUDE OIL PRICE IN NIGERIA

Abstract

In this study, the micro- economics in Nigeria were  modelled using restricted multivariate Generalized Autoregressive conditional heteroscedasticity (M-GARCH). This strategy was chosen because the restricted technique is smoother than the unconstrained approach. The original series' time plot revealed trend, and the return series' logarithm transformation revealed stationarity. The diagonal VECH and  BEKK models were  estimate using  the return series. However, for both Diagonal VECH and Diagonal BEKK, three conditional variances (GARCH) models and three co-variance models were computed. All of the variance and covariance models were significant at 5%. The Diagonal VECH model's parameters were all significant, although not all of them were positive definite. BEEK MODELS are required because the parameters of the square matrix of the Diagonal VECH model are not positive definite. All parameters in the BEKK model of the currency rate, inflation rate, and crude oil prices are significant and positive definite. Finally, the Diagonal BEKK model is the appropriate model for estimating the variance and co-variances of the exchange rate, inflation rate, and crude oil prices in Nigeria.