Inflationary pass-through effects of oil price shocks on the Zambian economy (1985-2019) (original) (raw)
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Do Oil Price Shocks Matter to Consumers in Zambia? An Svar Approach
EPRA international journal of economic and business review, 2022
This study investigated the impact of decomposed oil price shocks on household consumption in Zambia from 1985-2019. A structural Vector Autoregressive Model (SVAR) was used to measure the contemporaneous impact of oil price shocks on household consumption, and was complemented by Impulse Response Functions (IRFs), Granger Causality Tests and Forecast Error Variance Decompositions (FEVD). The existence of long-run relationships was determined by cointegration tests. The findings revealed that oil price shocks neither had short-run nor long-run impacts on consumption at the 5% level. Notwithstanding, it was found that oil-specific demand granger-causes consumption and that oil-specific demand shocks were attributed for the largest variation in consumption i.e. 6.5%. The findings implied that historic fuel subsidies insulated consumers from the adverse effects of oil price shocks. Therefore, the Zambian Government should introduce smart, optimal energy subsidies which have a less distortionary effect on its fiscal position.
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Oil price shocks have been argued to impact Real Effective Exchange Rates (REERs) in net oil importing countries, mostly through the wealth-transfer effect, which involves the transfer of wealth from net oil-importers to net oil-exporters, and the Terms of Trade Channel. Since this analysis had not been done for the Zambian case by decomposing oil price shocks, a Structural Vector Autoregressive Model (SVAR) was used to measure the contemporaneous impact of oil price shocks on REERs, and was complemented by Impulse Response Functions (IRFs), Granger Causality Tests and Forecast Error Variance Decomposition (FEVD). The long-run impact was analyzed by the Vector Error Correction Model (VECM) after satisfaction of cointegration requirements. The findings revealed that decomposed oil price shocks had no short-run contemporaneous impact on REERs at the 5% level. Similarly, it was found that decomposed oil price shocks and the combined effect of all the variables in the system did not gra...
232_256_bpas_e_dec.2020_1_.pdf, 2020
The import for oil in the whole world and particularly in Tanzania is heav- ily increasing due to the increasing number of cars, motorcycles, industries, and other machines for their operations. However, the imported oil has been going along with the imported inflation in the country. It is well known that a strong and stable inflation influences the economic growth of a country since it inspires investments, and enhances the consumers to afford purchasing of goods and service and therefore it affects the eco- nomic growth of a country. With this background, this study is conducted to examine the oil price shocks and inflation in Tanzania by including macro-economic variables such as crude oil price, inflation rate, exchange rate and GDP. The study employs the Auto- Regressive Distributed Lag (ARDL)approach of co-integration to establish a relationship between oil price shocks and inflation. The Vector Auto regression (VAR) approach through the Impulse Response Function (IRF), and Forecast Error Variance Decomposi- tion( FEVD)technique are used to examine the impact of oil price changes on inflation and to determine the degree of responsiveness of the inflation rate to shocks using annual data from 1970–2017.The results show that there exists a significant long run positive re- lationship between the inflation and the oil price. The results also show a significant long run negative relationship between the inflation and the GDP. In addition, the result from VAR approach reveals that the oil price and the exchange rate has a positive impact on the inflation while the GDP has a negative impact on the inflation. Based on the results of this study it is recommended that the government should find other source of energy to reduce heavily the importation of oil to reduce the inflationary pressure in Tanzania. Key words Inflation, Economic growth, Co-integration, unit roots, Auto-Regressive Distributed Lag, impulse response functions, Forecast Error Variance Decomposition, macro economy variables, oil price shocks.
The impact of oil price changes on inflation and disaggregated inflation: Insights from Ghana
Research in Globalization, 2023
Numerous studies have examined the impact of changes in oil price on economic activities in both developing and developed countries. Yet, studies on the impact of oil price on various sectors of the economy are limited, particularly in Ghana. To contribute to the literature and inform policy actions, we examine the impact of oil price changes on aggregated and disaggregated inflation where the disaggregated inflation comprises energy CPI, food CPI, Core CPI, and transport CPI. We applied Nonlinear Autoregressive Distributed Lag (NARDL) Model to quarterly data spanning from 2000Q1 to 2021Q1. The NARDL model was suitable for analysis because it accounted for asymmetries inherent in oil prices. Our results from the NARDL model suggest evidence of the asymmetric impact of oil price change on both aggregated and disaggregated inflation. However, the asymmetric effect of oil price changes on Transport CPI was statistically higher in magnitude than the other sub-indexes of inflation, suggesting that oil price changes affect the transport sector more than the other sectors of an economy. From a policy point of view, these findings imply that to stabilize inflation, policies should be designed to strengthen the transport sector to contain oil price shocks.
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In this paper, we attempt to analyze, during the period spanning from January 2000 to July 2015, the impact of oil price shocks on inflation and the real exchange rate in a six of oil importers and exporters MENA countries: Tunisia, Morocco, Algeria, Bahrain, Saudi Arabia and Iran (MENA-6) using a Structural VAR model. The impulse response functions reveal that, in the long run, oil price fluctuations have the major impact on real exchange rate of the oil-importing countries (Tunisia and Morocco) while the impact on inflation is smaller and absorbed by the rigidity of subsidized products prices. The variance decomposition results also assert that oil price shocks do not explain notably the variation in the two considered variables in Algeria and Iran. We further identify an impact on the two variables that is both statistically significant and economically large in the rest of countries.
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.
Oil Price Shocks and Macroeconomic Performance of the Nigerian Economy: A Structural Var Approach
Facta Universitatis, Series: Economics and Organization, 2020
This study examines the effect of oil price shocks on the macroeconomic performance of the Nigerian economy covering the period from 1980 to 2018. The effect of oil price shocks is investigated on macroeconomic variables like output growth, inflation, interest rate, exchange rate and industrial production index using the structural vector autoregression (SVAR) approach. The results of the investigation reveal that oil price shocks have significantly and negatively affected economic growth and industrial output. Furthermore, while the results show that oil price shocks have a significant positive effect on inflation, the effect is also positive on interest rate and exchange rate, but it is not significant. The results of impulse response function show a negative effect on output growth, it is positive on inflation, but mild and indeterminate on industrial production, interest rate and exchange rate. Based on findings in this study, the Renaissance theory and the Dutch Disease theorie...
The Effects of Oil Price Shocks and Exchange Rate Volatility on Inflation: Evidence from Malaysia
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The objective of this paper is to examine the effects of oil price shock on inflation in Malaysia, using monthly data from 2005 to 2011. VAR-VECM and Granger Causality model were employed to analyze the data. The cointegration between all variables are existence also at 5% significant level in the long run. But in the short run, only oil crude price affected the inflation. For granger causality test, we found that the inflation does not granger cause to the exchange rate but it does granger cause to the oil price. The oil price does granger cause to the inflation but it does not granger cause to the exchange rate. The exchange rate does not granger cause to both of the variables (Inflation and Oil Price). So, the oil crude price can give an effect on inflation. If the rate of oil crude price changes, the inflation also changes. This finding will contribute to Malaysian government in making policy to control the petrol price to avoid from the inflation.
Structural Vector Autoregressive Analysis of Crude Oil Price Shocks on Ghana’s Economy
Universal Journal of Finance and Economics
The paper analyses the extent to which crude oil price shocks impact GDP growth, exchange rate, interest rate and inflation of an emerging oil exporting economy, Ghana. The Structural Vector Autoregressive model is used to analyse the quarterly data from 2009q1-2020q4. The results showed that exchange rate and GDP growth respond positively but temporal to the impulse of crude oil price. In contrast, inflation and interest rate respond negatively to crude oil price shock. Specifically, the exchange rate appreciates in the initial quarter and begins to depreciate, whereas GDP growth experiences an increase in the first two quarters and also reduces afterwards. Crude oil price shocks to the Ghanaian economy follow the conventional behaviour of the impact of crude oil on macroeconomic indicators. The positive impact of the price shock on GDP growth and exchange rate is not much reflecting the fact that Ghana is an emerging oil-producing country with low production and export level. Ghana's prospects in the oil and gas sector should not just be a mere hoax. Policies should be directed toward petroleum exploration and production efforts since the energy transition endanger benefits for future exploitation. Policies should be implemented to attract competitive players locally and internationally in the oil industry. The shock of crude oil prices is beginning to show evidence based on this study. Therefore government must consider recognising the importance of other economic sectors in order not be become heavily dependent on oil.
Asian Journal of Economics, Business and Accounting
This study investigated the nexus of crude oil price shocks and exchange rates of Tanzanian shillings (TSh) as an oil importing country. Using weekly series data for the period 01/01/2005 to 31/12/2015, Vector Autoregressive (VAR) model was employed to test the relationship of crude oil prices and Tanzanian exchange rates. In addition, Granger Causality was tested to check the causality of these two variables. The findings of this study show that oil prices granger causes the exchange rate of TSh while exchange rates of TSh cannot Granger cause the oil prices. Also, the impulse response functions revealed that crude oil price shocks initially had a significant negative effect on TSh, however, there was a slightly negative effect on crude oil starting from TSh as a granger causer. VAR results showed that all the coefficients of TSh do not significantly influence crude oil prices. Crude oil price coefficients had a negative significance towards explaining the variability of Tanzanian ...