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Asymmetric Effect of Oil Price Change on Inflation: Evidence from Sub Saharan Africa Countries

Author

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  • Umar Tijjani Babuga

    (School of Business and Economics, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia,)

  • Niaz Ahmad Mohd Naseem

    (Department of Economics, Yusuf Maitama Sule University, Kano. PMB 3220, Kano Nigeria)

Abstract

This study is aimed at investigating the asymmetric effect of oil price change on inflation for Sub Saharan Africa (SSA) countries. Based on the findings from the dynamic heterogenous nonlinear panel ARDL estimation, a panel data representation of Shin et al. (2014), the long run asymmetric relationship exists between both oil price increase (op+) and decrease (op-) and inflation for these countries. Nevertheless, the oil price increase tends to exert more effect on inflation than the oil price decrease. Oil serves as a key input to the production process, therefore, changes in its price would have a great influence on the level of inflation which at last may hamper the process of economic progress. For policy implication, the monetary authorities shall pay more attention to the increase in oil price than the oil price decrease in designing appropriate policies of price stability as the former exerts greater impact on inflation than the latter. The price stability as one of the key macroeconomic goals could be attained if these countries understand the oil price-inflation relationship and then monetary measures can be adjusted to endure the effect of oil price changes especially increase in oil price on the price level so that stability in the prices of output can be maintained.

Suggested Citation

  • Umar Tijjani Babuga & Niaz Ahmad Mohd Naseem, 2021. "Asymmetric Effect of Oil Price Change on Inflation: Evidence from Sub Saharan Africa Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 448-458.
    • Handle: RePEc:eco:journ2:2021-01-53
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    Cited by:

    1. Khatai Aliyev & Sugra Humbatova & Natig Hajiyev Gadim-Oglu, 2023. "How Oil Price Changes Affect Inflation in an Oil-Exporting Country: Evidence from Azerbaijan," Sustainability, MDPI, vol. 15(7), pages 1-11, March.
    2. Umar Tijjani Babuga & Niaz Ahmad Mohd Naseem, 2022. "Oil Price Change and Economic Growth: Evidence from Net Sub-Saharan Africa Oil Exporting Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 12(2), pages 369-378, March.
    3. Arintoko Arintoko & Lilis Siti Badriah & Dijan Rahajuni & Nunik Kadarwati & Rakhmat Priyono & Muhammad Amin Hasan, 2023. "Asymmetric Effects of World Energy Prices on Inflation in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 185-193, November.
    4. Adel Benhamed & Mohamed Sadok Gassouma, 2023. "Preventing Oil Shock Inflation: Sustainable Development Mechanisms vs. Islamic Mechanisms," Sustainability, MDPI, vol. 15(12), pages 1-16, June.
    5. Siok Kun Sek, 2023. "A new look at asymmetric effect of oil price changes on inflation: Evidence from Malaysia," Energy & Environment, , vol. 34(5), pages 1524-1547, August.

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    More about this item

    Keywords

    Panel data; inflation; Asymmetry; Sub Saharan Africa;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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