Oil Price and Macroeconomic Variables a Comparative Study of African Oil and Non-Oil Producing Countries
Author: Ogunsakin Sanya and Ilesanmi Oluwaseyi Joshua, Nigeria
Abstract:This study assesses the relationship between oil price and macro-economic variables in African countries (oil and non-oil producing) between (1990-2018). Data for the study were sourced from United States of America Federal Reserve Economic Data (FRED) data base, Energy Information Administration (EIA) database and Central Banks of various countries selected. The study employs Panel Vector Error Correction model as estimation technique (PECM). The panel unit Root Test results show that variables (both exogenous and endogenous) are stationary at their first difference with individual effects and individual linear trends. The results of panel co-integration tests for both oil and non-oil African countries show that oil price and macroeconomic variables do not have a stable long-run equilibrium relationship. Results from impulse response function show that innovative shocks from positive oil price produced positive but insignificant responses from macroeconomic fundamentals while shocks coming from negative oil price produced negative and significant reactions from macroeconomic variables in African oil producing countries. In non-oil African countries, both positive and negative oil price shocks have influence on macroeconomic variables but this does not transit beyond short-run. Based on these findings, the study therefore, concludes that change in oil price has effects on macroeconomic fundamentals but the effect (negative and positive) are more pronounced in African oil producing countries. The study recommend that economic diversification is required in African economies but much required in oil producing countries.