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Oil price volatility and macroeconomy: Tales from top two oil producing economies in Africa

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  • Beyond Eagle

Abstract

This study examines the relationship between oil price volatility and macroeconomic performance in two top net oil exporting countries in Africa (Angola and Nigeria) using quarterly data from International Monetary Fund, Central Bank of Nigeria and Angola were used to carry out the empirical analysis. Using structural Vector Autoregressive Model (SVAR), E(GARCH) and Granger Causality test results shows that oil price volatility has marginal impact on growth rate of GDP in both countries. Both impulse response function and variance decomposition shows that shocks to exchange rate from oil price volatility was the highest i.e. exchange rate appreciates when oil price increases and depreciates when oil price reduces. The Granger causality test shows that the direction of causality between oil price volatility and macroeconomic variables in Nigeria was bi-directional while the relationship in Angola was unidirectional. Hence, both countries (Angola and Nigeria) should improve upon the refining capacity of their crude oil. Also, economic diversification should be strengthening to promote indigenous production to reduce importation of those goods that could be endogenously produced Classification JEL: E6; E30, E31

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  • Beyond Eagle, 2017. "Oil price volatility and macroeconomy: Tales from top two oil producing economies in Africa," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 5(4), pages 45-55, August.
    • Handle: RePEc:lrc:lareco:v:5:y:2017:i:4:p:45-55
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    Cited by:

    1. Maud Korley & Evangelos Giouvris, 2022. "The Impact of Oil Price and Oil Volatility Index (OVX) on the Exchange Rate in Sub-Saharan Africa: Evidence from Oil Importing/Exporting Countries," Economies, MDPI, vol. 10(11), pages 1-29, November.
    2. Omoke Philip Chimobi & Uche Emmanuel, 2020. "Asymmetric impact of oil price shocks on selected macroeconomic variables: NARDL exposition," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 0(1), pages 171-189.
    3. Rosnawintang Rosnawintang & Tajuddin Tajuddin & Pasrun Adam & Yuwanda Purnamasari Pasrun & La Ode Saidi, 2021. "Effects of Crude Oil Prices Volatility, the Internet and Inflation on Economic Growth in ASEAN-5 Countries: A Panel Autoregressive Distributed Lag Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 15-21.
    4. Lartey, Abraham, 2018. "Oil Price Dynamics and Business Cycles in Nigeria:A Bayesian Time Varying Analysis," MPRA Paper 90038, University Library of Munich, Germany.

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    More about this item

    Keywords

    E(GRACH); Granger causality; Macroeconomic performance; Oil Price Volatility.;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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