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An Analysis of Real Oil Prices and Real Exchange Rates in Five African Countries

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  • Abubakar Lawan Ngoma
  • Normaz Wana Ismail
  • Zulkornain Yusop

Abstract

This article examines the long-run interactions between real oil prices and real exchange rates in five oil-exporting African countries: Egypt, Ghana, Nigeria, South Africa and Tunisia. To accomplish this, symmetric and asymmetric cointegration tests and an error-correction modelling technique are applied. The results of the analysis reveal evidence of long-run co-movements between real oil prices and real exchange rates. More specifically, this involved symmetric adjustment of the real exchange rates to the long-run equilibrium values in Egypt, South Africa and Tunisia, caused by changes in real oil prices. Further evidence of persistence, as well as asymmetric adjustments of the real exchange rates to the long-run equilibrium path, were found to exist following an increase in oil price shocks in Ghana and Nigeria. Moreover, the analysis of short-run dynamics between real oil prices and real exchange rates produces evidence of real exchange rate appreciations in Nigeria, South Africa and Tunisia and real exchange rate fluctuations in Egypt and Ghana.

Suggested Citation

  • Abubakar Lawan Ngoma & Normaz Wana Ismail & Zulkornain Yusop, 2016. "An Analysis of Real Oil Prices and Real Exchange Rates in Five African Countries," Foreign Trade Review, , vol. 51(2), pages 162-179, May.
    • Handle: RePEc:sae:fortra:v:51:y:2016:i:2:p:162-179
    DOI: 10.1177/0015732515625718
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    Cited by:

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    2. Gao Wenxin & Wen Jun & Mahmood Hamid & Zakaria Muhammad, 2022. "Nonlinear and Asymmetric Impact of Oil Prices on Exchange Rates: Evidence from South Asia," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 16(1), pages 243-256, January.
    3. La Ode Saidi & Hasan Aedy & Fajar Saranani & Rosnawintang Rosnawintang & Pasrun Adam & La Ode Arsad Sani, 2020. "Crude Oil Price and Exchange Rate: An Analysis of the Asymmetric Effect and Volatility Using the Non Linear Autoregressive Distributed Lag and General Autoregressive Conditional Heterochedasticity in ," International Journal of Energy Economics and Policy, Econjournals, vol. 10(1), pages 104-108.
    4. Moses K. Tule & Taiwo Ajilore & Augustine Ujunwa, 2019. "Monetary Policy Contagion in the West African Monetary Zone," Foreign Trade Review, , vol. 54(4), pages 375-398, November.

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    More about this item

    Keywords

    Oil price; real exchange rate; cointegration; asymmetry; Africa;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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