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Oil price distortions and their short- and long-run impacts on the Nigerian economy

Author

Listed:
  • Chuku, Chuku
  • Effiong, Ekpeno
  • Sam, Ndifreke

Abstract

Given its economic structure, high energy intensity and simultaneity as an oil importing and exporting economy, Nigeria stands out as a special case to study the oil-price-macroeconomy relation. This paper studies the linear and asymmetric impacts of oil price shocks on the Nigerian economy between1970Q1and 2008Q4. Using the vector error correction mechanism and the Granger causality test, we investigate the long-run and short-run impacts of oil price shocks on the supply-side of the economy, wealth transfer effect, inflation effect and real balance effect. Overall, the results from the linear model show that oil price shocks are not a major determinant of macroeconomic activity in Nigeria, and macroeconomic activities in Nigeria do not Granger cause world oil prices. Further, the results from our non-linear specification reveals that the impact of world oil price shocks on the Nigerian economy are asymmetric. Hence, the common practise of national development planning premised on forecasts of international oil prices should be de-emphasized in Nigeria.

Suggested Citation

  • Chuku, Chuku & Effiong, Ekpeno & Sam, Ndifreke, 2010. "Oil price distortions and their short- and long-run impacts on the Nigerian economy," MPRA Paper 24434, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24434
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    File URL: https://mpra.ub.uni-muenchen.de/24434/1/MPRA_paper_24434.pdf
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Arshad Khan & Ayaz Ahmed, 2011. "Macroeconomic Effects of Global Food and Oil Price Shocks to the Pakistan Economy: A Structural Vector Autoregressive (SVAR) Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 491-511.
    2. Hassan, Syeda Anam & Zaman, Khalid, 2012. "Effect of oil prices on trade balance: New insights into the cointegration relationship from Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2125-2143.
    3. C. O. Mgbame & P. A. Donwa & S. A. Ogbaisi, 2015. "Oil price movements and Nigeria`s economic indicators," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 5(5), pages 59-63, May.
    4. Muhammad Faraz Riaz & Maqbool Hussain Sial & Samia Nasreen, 2016. "Impact of Oil Price Volatility on Manufacturing Production of Pakistan," Bulletin of Energy Economics (BEE), The Economics and Social Development Organization (TESDO), vol. 4(1), pages 23-34, March.
    5. Riman, Hodo B. & Akpan, Emmanuel S. & Offiong, Amenawo I, 2013. "Asymetric Effect of Oil Price Shocks on Exchange Rate Volatility and Domestic Investment in Nigeria," MPRA Paper 53282, University Library of Munich, Germany, revised 21 Aug 2013.

    More about this item

    Keywords

    Oil price shocks; linear and asymmetric effects; transmission channels; Nigerian economy.;

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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