Oil Price Volatility and Macroeconomic Performance in Selected African Countries
Keywords:
Oil price volatility, macroeconomic performance, fully modified OLS
Abstract
Policymakers are concerned with large price movements in the crude oil market, as this has possible effect on the macroeconomy. This paper examined oil price volatility and its effect on macroeconomic performance of eight African countries for the period 1980-2012 based on data availability and categorized them into oil exporting and importing countries, applying recently developed panel cointegration methods. The results showed that oil price volatility impeded on the macroeconomic variables of oil importing countries of Africa and facilitated the macroeconomic performance of oil exporting countries of Africa. The study recommended that individual economy be protected against the adverse effects of such volatility through diversification of the sources of revenue generation against external shocks.
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Akpan E.O. (2009): Oil Price Shocks and Nigeria’s Macroeconomy. A Paper Presented at the Annual Conference of CSAE Conference, Economic Development in Africa, 22nd-24thMarch, Oxford
Aliyu, S.U.R. 2009. Oil price shocks and the macroeconomy of Nigeria: a nonlinear approach. Munich Personal RePEc Archive
Ayadi O.F. (2005): Oil price fluctuations and the Nigerian economy. OPEC Review, Sept. 199-217
Ayadi O.F., Chatterjee A. and C.P. Obi (2000): A vector autoregressive (VAR) analysis of an oil-dependent emerging economy - Nigeria, OPEC Review, December, 329–49.
Backus D.K. and Crucini M.J. (2000): Oil prices and the terms of trade. Journal of International Economics 50:185-213.
Bernanke B., Gertler M. and M. Watson, (1997): Systematic Monetary Policy and the Effect of Oil Price Shocks, Brookings Papers on Economic Activity 1: 91-142.
Breitung, J., 2000. The local power of some unit root tests for panel data. In: Baltagi, B. (Ed.), Nonstationary Panels, Panel Cointegration, and Dynamic Panels. Advances in Econometrics, vol. 15. JAI, Amsterdam, pp. 161–178.
Chen, S.-S., H.-C., Chen. 2007. Oil prices and real exchange rates. Energy Economics Journal 29: 390-404.
Farzanegan M.R. and G. Markwardt (2009): The Effects of Oil Price Shocks on the Iranian Economy. Energy Economics 31(1): 134‐151
Hamilton J.D. and A.M. Herrera (2001): Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy, Mimeo, Dept of Economics, University of
California, San Diego.
Khan, B., Ahmed.and Ali, Mubashir, Syed. (2000). ‘Energy Policy in Pakistan: An Investigation of The Tariff Structure of Petroleum Products’. Working Paper No. 00- 24. Centre for Management and Economic Research, Lahore University of Management Sciences, Lahore.
Kilian, L. (2009). Comment on ‘Causes and consequences of the oil shock of 2007-08’ by J.D. Hamilton. Brookings Papers on Economic Activity, 1, Spring; 267-278
Korhonen, I., A., Mehrotra. 2009. Real exchange rate, output and oil: Case of four large energy producers. BOFIT.
Latife, G. (2011). ‘The Interaction between Oil Price and Economic Growth’, Middle Eastern Finance and Economics.Issue 13.
Larsson, R., J., Lyhagen, M., Lothgren. 2001. Likelihood-based cointegration tests.
Levin, A., Lin, C.F., 1993. Unit Root Tests in Panel Data: New Results. Discussion Paper.Department of Economics, UC-San Diego.
Levin, A., Lin, C.F., Chu, C., 2002. Unit root test in panel data: asymptotic and finite sample properties. Journal of Econometrics 108 (1), 1–24.
Maddala, G.S., Wu, S., 1999. A comparative study of unit root tests with panel data and new simple test. Oxford Bulletin of Economics and Statistics 61, 631–652.
Mork, K.A. 1989. Oil shocks and the macroeconomy when prices go up and down: an extension of Hamilton's results. Journal of Political Economy 97: 740–744.
Mork, K.A., Oslen, O. and Mysen, H. 1994. Macroeconomic responses to oil price increases and decreases in seven OECD countries. Energy Economics Journal 15: 19-35.in heterogeneous panels. Econometrics Journal 41: 109–142.
Muhammad BachalJamali, Asif Shah, Hassan JawadSoomro, Kamran Shafiq and FaizM.Shaikh, (April 2011). ‘Oil Price Shocks: A Comparative Study on the Impacts in Purchasing Power in Pakistan’. Modern Applied Science Journal.Vol.5, No. 2.
Pedroni, P. 2004. Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to PPP hypothesis. Econometric Theory 20: 597–625.
Pesaran, M.H., 2005. A simple panel unit root test in presence of cross section dependence Cambridge University Working Paper.
Pesaran, H., Smith, R., 1995. Estimating long-run relationships from dynamic heterogeneous panels. Journal of Econometrics 68, 79–113.
Pesaran, H., Shin, Y., Smith, R., 1999. Pooled Mean Group estimation and dynamic heterogeneous panels. Journal of the American Statistical Association 94, 621–634.
Rautava, J. 2004. The role of oil prices and the real exchange rate in Russia’s economy – a cointegration approach. Journal of Comparative Economics 32: 315-32
West African Monetary Agency (2008): Impact of Petroleum Price Fluctuations on Key Convergence Criteria in ECOWAS member states.
Published
2016-09-01
Section
Articles
