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Does Crude Oil Price, Financial Development, and Trade Openness Reflect on African Oil-Rich Countries' Economic Growth?

Author

Listed:
  • Ahmed Krouso

    (Faculty of Management, Universiti Teknologi Malaysia, Johor, Malaysia)

  • Nanthakumar Loganathan

    (Faculty of Management, Universiti Teknologi Malaysia, Johor, Malaysia)

  • Yogeeswari Subramaniam

    (Faculty of Management, Universiti Teknologi Malaysia, Johor, Malaysia)

  • Tirta Nugraha Mursitama

    (International Relations Department, Faculty of Humanities Bina Nusantara University, Jakarta, Indonesia)

Abstract

This study investigates empirically the long- and short-run impact of crude oil price and financial globalization on economic growth and financial development in selected oil-rich African countries. The data usage covers 1980 to 2021 by applying the autoregressive distributed lag (ARDL) modeling to determine the short- and the long-run estimates, and the ARDL-ECM Granger causality to discover the causalities direction. The empirical results reveal that crude oil price and financial globalization have no significant effect on restructuring the economic sustainability patterns in either the long or the short run. There are various causality directions found for those countries involved in this study within the short- and long-run periods. This study recommends that the Republic of Congo and Nigeria should always maximize oil revenue during periods of oil price boom to offset the economic severity during periods of oil price reduction. Further, Algeria and Nigeria's policymakers should avoid protectionism against financial globalization, economic growth, and trade to mobilize the resources required to be at the fulcrum of future economic restructuring. The empirical findings will be useful for policymakers to design a suitable growth model for African countries that highly depend on crude oil resources as an engine of economic growth.

Suggested Citation

  • Ahmed Krouso & Nanthakumar Loganathan & Yogeeswari Subramaniam & Tirta Nugraha Mursitama, 2023. "Does Crude Oil Price, Financial Development, and Trade Openness Reflect on African Oil-Rich Countries' Economic Growth?," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 25(2), pages 5-39, December.
    • Handle: RePEc:iez:survey:ces-v25_2-2023_krouso-loganathan-subramaniam-mursitama
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    References listed on IDEAS

    as
    1. Zafar, Ali, 2004. "What happens when a country does not adjust to terms of trade shocks? the case of oil-rich Gabon," Policy Research Working Paper Series 3403, The World Bank.
    2. Brahim Gaies, 2021. "Curse or blessing: how do oil price fluctuations influence financial development in low- and middle-income net oil-exporting countries?," Economics Bulletin, AccessEcon, vol. 41(2), pages 751-763.
    3. Ms. Nicole Laframboise & Ms. Patricia Alonso-Gamo & Mr. Alain Feler & Mrs. Stefania Bazzoni & Mr. Karim A. Nashashibi & Sebastian Paris Horvitz, 1998. "Algeria: Stabilization and Transition to Market," IMF Occasional Papers 1998/013, International Monetary Fund.
    4. Salisu, Afees A. & Mobolaji, Hakeem, 2013. "Modeling returns and volatility transmission between oil price and US–Nigeria exchange rate," Energy Economics, Elsevier, vol. 39(C), pages 169-176.
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    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C59 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Other
    • E70 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - General

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