Quantifying the heterogeneous effects of oil price shocks on domestic inflation of oil-rich countries in sub-Saharan Africa

The study investigates the impact of oil price shocks on inflation components in Nigeria Congo, Angola, and Equatorial Guinea using non-linear and threshold non-linear autoregressive distributed lag models. In the long run, positive oil price shocks significantly influenced core and headline inflation in Nigeria and Angola, while negative shocks had stronger effects in Equatorial Guinea and the Republic of Congo, particularly energy and fold inflation. Mild positive shocks increased inflation in Angola and the Republic of Congo but reduced inflation in Equatorial Guinea. Mild negative shocks reduced inflation in Equatorial Guinea but raised inflation in the Republic of Congo. Moderate shocks had mixed effects, with positive shocks increasing inflation. In the long run, large positive shocks generally raised inflation, while moderate and mild shocks had mixed or insignificant effects. The study recommends for diversification of economic sectors and strengthening of inflation targeting framework to stabilize prices.