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Oil Price Fluctuations and Output performance in Nigeria : a Var Approach

Author

Listed:
  • Ismail O. Fasanya

    (Department of Economics and Financial Studies, Fountain University, Osogbo, Osun State, Nigeria)

  • Adegbemi B.O Onakoya

    (Department of Economics, College of Management Sciences, Tai Solarin University of Education, Ijagun, Ijebu-Ode, Nigeria)

Abstract

This paper examines the impact of oil price movements on real output growth in Nigeria during the period 1970 to 2011 making use of annual time series data. The empirical analysis rests on dynamic VAR analytical framework. To capture the possible channels reflecting the fluctuations in the oil prices, the model includes money supply, real exchange rate, government spending and inflation. Our findings indicate the lagged effects of the VAR model are not able to capture any significant impact of changes in oil prices, and oil price shocks are therefore not found to contribute directly to output, exchange rate or inflation in the short run but show a positive significant relationship to output growth in the long run. Following the VAR model results, the generalized impulse responses reaffirm the direct link between the net oil price shock and growth, as well as the indirect linkages.

Suggested Citation

  • Ismail O. Fasanya & Adegbemi B.O Onakoya, 2013. "Oil Price Fluctuations and Output performance in Nigeria : a Var Approach," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 16(49), pages 47-72, September.
    • Handle: RePEc:rej:journl:v:16:y:2013:i:49:p:47-72
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    References listed on IDEAS

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    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    2. Farzanegan, Mohammad Reza & Markwardt, Gunther, 2009. "The effects of oil price shocks on the Iranian economy," Energy Economics, Elsevier, vol. 31(1), pages 134-151, January.
    3. Aliyu, Shehu Usman Rano, 2009. "Impact of Oil Price Shock and Exchange Rate Volatility on Economic Growth in Nigeria: An Empirical Investigation," MPRA Paper 16319, University Library of Munich, Germany, revised 10 Jun 2009.
    4. Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 195-213, October.
    5. Rafiq, Shuddhasawtta & Salim, Ruhul & Bloch, Harry, 2009. "Impact of crude oil price volatility on economic activities: An empirical investigation in the Thai economy," Resources Policy, Elsevier, vol. 34(3), pages 121-132, September.
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    Cited by:

    1. Ismail O. Fasanya & Abiodun Adetokunbo & Felix O. Ajayi, 2018. "Oil Revenue Shocks and the Current Account Balance Dynamics in Nigeria: New evidence from Asymmetry and Structural Breaks," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 68(4), pages 72-87, October-D.

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    More about this item

    Keywords

    Oil Price Shocks; GDP; Vector Autoregressive;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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