Oil Market Demand Shock and Monetary Policy Targets in Nigeria: Evidence From TVP-VAR

This paper examines the effect of oil-specific demand shocks on monetary policy targets. The effect of real oil price shock was disentangled using restrictions in a time-varying parameter vector autoregression (TVP-VAR) framework. The empirical findings uncover a negative link between oil-specific demand shocks and monetary policy targets under a managed float exchange rate regime. The paper concludes that appreciation of the intermediate target attributed to oil shocks has a potential disinflationary effect in the long run but at the cost of output.