The Macroeconomic Effects of Oil Prices Fluctuations in Algeria: A Svar Approach (original) (raw)
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The macroeconomic effects of oil prices fluctuations in Algeria: An SVAR approach
2020
The structural dependence of the Algerian economy on the hydrocarbons sector is of great concern, first because it represents the main foreign currency inflows to the economy; it also has been a source of pro-cyclicality to government spending and taxes policy.The actual dual shock of the COVID-19 pandemic and the oil prices plunge makes it very important to conduct an analysis that assesses the direct and indirect effects of oil price fluctuations on the Algerian economic activity.Using an SVAR model we analyze the dynamics of the GDP structure by subjecting its components to an exogenous shock. We use quarterly data covering the period 1999 to 2019 to evaluate the response of national account aggregates (from both the production and demand sides) to oil price shocks. We also explore the similarities in their fluctuations with the ones observed in oil prices and foreign reserves; we consider the later as a damper that can absorb foreign shocks. Our results show a strong and clear i...
Macroeconomic Impacts Of Oil Price Shocks: An Empirical Analysis Based On The Svar Models
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Since oil is a major source of energy, many sectors of the economy are directly or indirectly dependent on oil. Therefore, oil price shocks have many important effects on the global economy. The aim of this paper is to investigate the effects of oil price shocks on key macroeconomic variables of the Turkey by using SVAR analysis for the period from 2005Q1 to 2017Q2. Our empirical evidence confirmed that the increase in the price of crude oil in Turkey leads to a decrease in economic growth while increasing crude oil prices, inflation and real exchange rate.
Oil Price Shocks And Algerian Economy:, Evidence From The New Economic Model
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This study aims at investigating the existence of a clear relationship between 2014 oil shock and the orientation of Algeria towards implementing more sustainable development programs. To explore this relationship, four sustainable development indicators were used, namely: gross domestic product, CO2 emissions, energy depletion, and unemployment as dependent variables. In addition to, crude oil prices as independent variable. We employ an autoregressive distributor lag (ARDL) approach to test both long and short run relationship between the study variables during the period of 1987 to 2017. The results of the study reveal the existence of an interaction between all variables. These findings can be interpreted as tangible efforts of Algerian government to integrate sustainable development programs to break total dependency to oil revenues.
The impact of changes in oil prices on monetary and trade policy in Algeria (2000-2017)
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As Algeria is considered among the rentier states that depend on oil revenues in the implementation of projects and development programs, like other rentier countries of the world, they are affected by fluctuations in oil prices in world markets, and any sudden shift in prices and the subsequent recession and prosperity in economic cycles are situations that policymakers find it difficult to manage effectively. The volatility of prices has exerted effects on the economic policies of the state as a result of monetary and trade policy and fiscal policy negatively affected and positively with the volume of volatile oil revenues, Algeria witnessed the positive and negative fluctuations of oil prices during the period 2000-2017, from the beginning of 2000 to 2014 known In fiscal terms through surpluses resulting from the high oil prices and in the period 2015-2017 has been characterized by a deficit in financial returns, so Algeria sought to take the necessary measures to stabilize its e...
Energy Policy, 2011
This study examines the impact of oil price uncertainty on Malaysian macroeconomic activities and monetary responses. We use a structural VAR (SVAR) model based on monthly data over the period 1986 À 2009. The EGARCH model estimates show an important asymmetric effect of oil price shocks on the conditional oil price volatility. Dynamic impulse response functions obtained from the SVAR model show a prolonged dampening effect of oil price volatility shock on Malaysian industrial production. We also find that levels of Consumer Price Index (CPI) decline with a positive shock to oil price uncertainty. This is the result of negative demand shock due to the postponement of consumption of big ticket items by individuals, households and other sectors of the economy. We also found that the Malaysian central bank adopts an expansionary monetary policy in response to oil price uncertainty. Variance decomposition analysis reconfirms that volatility in the oil price is the second most important factor to explain the variance of industrial production after its own shocks. These results shed some light on how the central bank of Malaysia can use controlling mechanisms to stabilize aggregate output and price level.
The Relationship Between Oil Price and the Algerian Exchange Rate
Topics in Middle Eastern andNorth African Economies, 2014
The goal of this study is to investigate the relationship between oil price and the nominal US Dollar/Algerian Dinar exchange rate through an empirical analysis using a VAR Model (Vector Autoregressive Model) upon monthly data for the period 2003-2013. Results show that a cointegration relationship is not detected between the oil and exchange rate in Algeria. However, the estimation of a VAR model indicates that a 1% increase in oil price would tend to depreciate Algerian Dinar against US Dollar by nearly 0.35%. This negative impact emphasizes how the Algerian dinar is a non-oil currency and explains how the foreign exchange receipts from hydrocarbon exports help swell Algerian public spending that would cater for public budget deficit curtailment.
The impact of fluctuating oil prices on inflation in Algeria
2014
As Algeria is an oil-rich country having its revenues entirely linked to hydrocarbon exports, tensions in the oil market might engender risks of macroeconomic imbalances. Bearing in mind the importance of oil for the world economy and its fallout during a prolonged surge of its prices, it would be interesting to investigate the relationship inflation-oil prices, which is a point of contrast among economists. At first, we will display theoretical background of inflation and the inflation patterns in Algeria, before putting evidence of strategic issues of the oil revenues in Algeria. We will finish by an econometric analysis via a VAR model of the eventual relationship between oil prices and inflation in Algeria. This article aims to answer the question: “What’s the impact of oil price fluctuations on inflation in Algeria? I. INTRODUCTION In a world full of problems, wars and crises; oil is ranked among all-economies as of paramount importance. Its nickname “black gold” suffices to hi...
Macroeconomic effects of oil price shocks on the major oil-exporting countries
Ahmad Hassan, 2022
Crude oil remains the primary source of energy, accounting for almost a third of global energy production. The international oil price is highly volatile and carries serious consequences for the oil-exporting economies. The exports, foreign reserves, and government revenue are impacted by the crude oil price shocks. The falling oil prices trigger an imbalance in trade, and balance of payments and widens the fiscal deficit. This paper examined the impact of oil price fluctuation in twenty-nine major oil exporting economies using the structural auto-vector regression model (SVAR) for the period from 1991 –2020. For empirical analysis annual data for the exports (EXP), foreign exchange reserves (RES), nominal effective exchange rate (EXC), fiscal balance (FisBal), and GDP growth (GDPg) are used in this research. The empirical findings show the vulnerability of developing economies to past oil price slumps. The Middle Eastern, Latin American, and African economies are the most oil-reliant. Economic growth in transitional economies is contributed by the oil sector. The fiscal structure of the government is built around the oil economy in developing oil-exporting countries. Thus, these countries should attempt the diversification of their fiscal structure for revenue and encourage alternate non-oil exports.
Structural Effect of Oil Price Shocks on Some Macroeconomics Variables in Nigeria: A SVAR Method
International Journal of Innovative Research in Science, Engineering and Technology, 2017
This study investigates the structural effect of oil price shocks on some macroeconomic variables in Nigeria using Structure Vector Autoregressive (SVAR) Model. Structural response and Structural variance decompositions were used to forecast the variability cause by oil price shocks. The result from SVAR Short-run Pattern show that Crude oil price shock is the most endogenous variable in the model affected by inflation rate, while the remaining variables do not affect crude oil price shocks while SVAR long-run pattern shows crude oil price shock has an effect on all the variables. The results from structural response indicate that crude oil price has a positive and negative effect at short run but with no effect at long run. The results from the structural decompositions indicated that exchange rate contributes more variability in explaining the variation on crude oil price with less from interest rate. The policy makers in Nigeria should focus on policies that will strengthen and stabilize the macroeconomic structure of the economy.
Crude Oil Shocks and Price Stability Within the Monetary Policy Framework: A SVAR Analysis
The importance of stabilizing the macroeconomic indicators in the face of changing crude oil industrial fundamentals both within and on the international front, cannot be overemphasized. Several studies on crude oil production and macroeconomic stability in less developed nations have often concentrated on crude oil prices and revenue without recourse to the changing dynamics in the oil industry. This paper demonstrates how inflation rate responds to the activities in the oil industry within the context of the monetary policy framework. Three variables were used to capture the activities in the oil industry in Nigeria, viz; oil price, oil revenue and investment in exploration and drilling. The variables were sourced from CBN Statistical Bulletin, CBN website, Thomson Reuters workbook and Y-Charts. Utilizing a Structural VAR framework, findings reveal that the response of inflation to shocks from oil price was insignificant but responds significantly to investment in exploration and drilling within the monetary policy framework in Nigeria. The conclusion is hinged on the heterogeneous behaviors across the presence and absence of industry factor variable in the model which confirms that the happenings in the domestic industry have serious implications on how macroeconomic variables respond. The study thus, recommends policy changes including purposeful industry governance, classification of petroleum resources as strategic national assets, reconsideration of OPEC membership, economic diversification, and better management of revenue accruable from the petroleum industry.