Asymmetric behavior of oil price shocks and output performance in Africa

Abstract views: 137 / PDF downloads: 233




Asymmetric Behavior, Oil Price Shocks, Panel VAR, Africa’s, Oil Exporting Countries


A comprehensive cross-country dataset is employed in this reseach to examine the impact of oil price shocks and its asymmetry on output in African oil exporting countries (AOECs). Using a panel-VAR model, the study accounted for impulse-response between output and oil price shocks. In addition, through the PVAR model, variance decomposition is performed to assess the importance of those effects and guidelines are offered for policy formation. The study revaled that oil price shocks create heterogeneously asymmetric effect on output. The study revealed the prevalence of Dutch Disease among the AOECs as apparent in the impact of negative oil price shocks on exchange rates and output. The study recommends that policies should be formulated to minimize the effect of oil price shocks on output, especially negative oil price shocks revealed to adversely affect oil revenue (policies aimed at strengthening economic activities through diversification, so as to enhance the export mix). This will reduce the AOECs’ on-going reliance on large revenues from oil, arising from positive oil price shocks which the literature has argued to have a negative and hindering impact on economy, mainly because it impacts the non-oil sector.


Download data is not yet available.


AASTVEIT, K. A., BJORNLAND, H. C., & THORSRUD, L. A. (2015). What drives oil prices? Emerging versus developed economies. Journal of Applied Econometrics, 30(7), 1013-1028.

ADAROV, A. (2019). Dynamic interactions between financial and macroeconomic imbalances: A Panel VAR Analysis (No. 162). wiiw Working Paper.

ALIYU, S.U.R. (2009). Impact of Oil Price Shock and Exchange Rate Volatility on Economic Growth in Nigeria: An Empirical Investigation. Research Journal of International Studies, 5(11), 4-15.

APERGIS, N., ASLAN, A., AYE, G. C., & GUPTA, R. (2015). The asymmetric effect of oil price on growth across US States. Energy Exploration & Exploitation, 33(4), 575-590.

ASAB, N. A. (2017). The Effect of Asymmetric Oil Price Shocks on Industrial Production in Jordan. International Journal of Economics and Financial Issues, 7(2), 118-124.

BALTAGI, B. H., & KAO, C. (2001). Nonstationary panels, cointegration in panels and dynamic panels: A survey. In Nonstationary panels, panel cointegration, and dynamic panels (pp. 7-51). Emerald Group Publishing Limited.

BERNANKE, B. S., & MIHOV, I. (1998). Measuring monetary policy. The quarterly journal of economics, 113(3), 869-902.

BERNANKE, B. S., GERTLER, M., WATSON, M., SIMS, C. A., & FRIEDMAN, B. M. (1997). Systematic monetary policy and the effects of oil price shocks. Brookings papers on economic activity, 1997(1), 91-157.

BIRDSALL, N., PINCKNEY, T., & SABOT, R. (2001). Natural resources, human capital. Resource abundance and economic development, 57.

BODENSTEIN, M., GUERRIERI, L., & GUST, C. J. (2013). Oil shocks and the zero bound on nominal interest rates. Journal of International Money and Finance, 32, 941-967.

CANOVA, F., & CICCARELLI, M. (2004). Forecasting and turning point predictions in a Bayesian panel VAR model. Journal of Econometrics, 120(2), 327-359.

CANOVA, F., & CICCARELLI, M. (2012). ClubMed? Cyclical fluctuations in the Mediterranean basin. Journal of International Economics, 88(1), 162-175.

CATIK, A. N., & ONDER, A. Ö. (2013). An asymmetric analysis of the relationship between oil prices and output: The case of Turkey. Economic Modelling, 33, 884-892.

CHEN, S. S., & CHEN, H. C. (2007). Oil prices and real exchange rates. Energy Economics, 29(3), 390-404.

COLOGNI, A., & MANERA, M. (2008). Oil prices, inflation and interest rates in a structural cointegrated VAR model for the G-7 countries. Energy Economics, 30(3), 856-888.

CUNADO, J., JO, S., & DE GRACIA, F. P. (2016). Macroeconomic impacts of oil price shocks in Asian economies. Energy Policy, 86, 867-879.

DAMECHI, K. (2012). The effect of the crude oil price change and volatility on the Nigerian economy. Munich Personal RePEc Archive. I-35.

DEMARY, M. (2010). The interplay between output, inflation, interest rates and house prices: international evidence. Journal of Property Research, 27(1), 1-17.

DI GIOVANNI, J., & SHAMBAUGH, J. C. (2008). The impact of foreign interest rates on the economy: The role of the exchange rate regime. Journal of International economics, 74(2), 341-361.

ELDER, J., & SERLETIS, A. (2010). Oil price uncertainty. Journal of Money, Credit and Banking, 42(6), 1137- 1159.

FRIMPONG MAGNUS, J., & OTENG-ABAYIE, E. F. (2006). Bounds testing approach: an examination of foreign direct investment, trade, and growth relationships. American Journal of Applied Sciences, 1-22.

GACHARA, A. (2015). Channels through which oil price shocks affect economic activity in Kenya. International Journal of Energy Economics and Policy, 3(2), 143-152.

GRAVIER-RYMASZEWSKA, J. (2012). How aid supply responds to economic crises: A panel VAR approach (No. 2012/25). WIDER working paper.

HAMILTON, J. D. (2003). What is an oil shock?. Journal of econometrics, 113(2), 363-398.Hamilton, J. D. (2008). Understanding crude oil prices (No. w14492). National Bureau of Economic Research.

HAMILTON, J. D. (2009). Causes and Consequences of the Oil Shock of 2007-08 (No. w15002). National Bureau of Economic Research.

HAMILTON, J. D. (2013). Historical oil shocks. In Routledge handbook of major events in economic history (pp. 258-284). Routledge.

HATEMI-J, A., & S. HACKER, R. (2009). Can the LR test be helpful in choosing the optimal lag order in the VAR model when information criteria suggest different lag orders?. Applied Economics, 41(9), 1121-1125.

HERRERA, A. M., LAGALO, L . G., & WADA, T. (2011). Oil price shocks and industrial production:Is the relationship linear? Macroeconomic Dynamics, 15(S3), 472-497.

HJORT, J. (2006). Citizen funds and Dutch Disease in developing countries. Resources Policy, 31(3), 183-191.

HOLTZ-EAKIN, D., NEWEY, W., & ROSEN, H. S. (1988). Estimating vector autoregressions with panel data. Econometrica: Journal of the Econometric Society, 1371-1395.

HOOKER, M. A. (1996). This is what happened to the oil price-macroeconomy relationship: Reply. Journal of Monetary Economics, 38(2), 221-222.

HUANG, B. N., HWANG, M. J., & PENG, H. P. (2005). The asymmetry of the impact of oil price shocks on economic activities: an application of the multivariate threshold model. Energy Economics, 27(3), 455-476.

IM, K. S., PESARAN, M. H., & SHIN, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of econometrics, 115(1), 53-74.

KAPETANIOS, G., MITCHELL, J., & SHIN, Y. (2014). A nonlinear panel data model of cross-sectional dependence. Journal of Econometrics, 179(2), 134-157.

KIA, A. (2013). Determinants of the real exchange rate in a small open economy: Evidence from Canada. Journal of International Financial Markets, Institutions, and Money, 23, 163-178.

KILIAN, L. (2010). Oil price volatility: Origins and effects (No. ERSD-2010-02). WTO Staff Working Paper. Kilian, L., & Vigfusson, R. J. (2011). Are the responses of the US economy asymmetric in energy price increases and decreases? Quantitative Economics, 2(3), 419-453.

KORHONEN, I., & LEDYAEVA, S. (2010). Trade linkages and macroeconomic effects of the price of oil. Energy Economics, 32(4), 848-856.

KORHONEN, I., & JUURIKKALA, T. (2007). Equilibrium exchange rates in oil-dependent countries. BOFIT Discussion Papers 8/2007, Bank of Finland. Institute for Economies in Transition.

KOSE, N., & BAIMAGANBETOV, S. (2015). The asymmetric impact of oil price shocks on Kazakhstan macroeconomic dynamics: A structural vector autoregression approach. International Journal of Energy Economics and Policy, 5(4), 1058-1064.

LEE, C. C., & CHANG, C. P. (2008). Energy consumption and economic growth in Asian economies: a more comprehensive analysis using panel data. Resource and Energy Economics, 30(1), 50-65.

LEE, K., NI, S., & RATTI, R. A. (1995). Oil shocks and the macroeconomy: the role of price variability. The Energy Journal, 39-56

LEE, T. H., & YOUNGHO, Y. (2013). Oil price shocks and trade imbalances. Energy Economics, 36, 78-96.

LEVIN, A., LIN, C. F., & CHU, C. S. J. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of econometrics, 108(1), 1-24.

LOUNGANI, P. (1986). Oil price shocks and the dispersion hypothesis, 1900-1980. Rochester Center for Economic Research Working Paper, 33.

LUTKEPOHL, H. (2006). Forecasting with VARMA models. Handbook of economic forecasting, 1, 287-325.

MOON, H. R., & PERRON, B. (2004). Testing for a unit root in panels with dynamic factors. Journal of econometrics, 122(1), 81-126.

MOON, H. R., PERRON, B., & PHILLIPS, P. C. (2007). Incidental trends and the power of panel unit root tests. Journal of Econometrics, 141(2), 416-459.

MORK, K. A. (1989). Oil and the macroeconomy when prices go up and down: an extension of Hamilton’s results. Journal of Political Economy, 97(3), 740-744.

MOSHIRI, S. (2015). Asymmetric effects of oil price shocks in oil-exporting countries: the role of institutions. OPEC Energy Review, 39(2), 222-246.

NARAYAN, P. K., & GUPTA, R. (2015). Has oil price predicted stock returns for over a century?. Energy Economics, 48, 18-23.

OJO AND ALEGE, P. O. (2012). A Business Cycle Model for Nigeria. CBN Journal of Applied Statistics, 3(1), 85-115.

OOMES, N., & KALCHEVA, K. (2007). Diagnosing Dutch disease: does Russia have the symptoms? (Vol. 7). International Monetary Fund.

Organization of Petroleum Exporting Countries, & Organization of Petroleum Exporting Countries Statistics Unit. (2016). Annual Statistical Bulletin. Organization of the Petroleum Exporting Countries.

RAFIQ, S., SGRO, P., & APERGIS, N. (2016). Asymmetric oil shocks and external balances of major oil exporting and importing countries. Energy Economics, 56, 42-50.

RAHMAN, S., & SERLETIS, A. (2011). The asymmetric effects of oil price shocks. Macroeconomic Dynamics, 15(S3), 437-471.

SACHS, J. D., & WARNER, A. M. (2001). The curse of natural resources. European economic review, 45(4-6), 827-838.

SIMS, C. A. (1980). Macroeconomics and reality. Econometrica: Journal of the Econometric Society, 1-48.

SUBRAMANIAN, M. A., & SALA-I-MARTIN, X. (2003). Addressing the natural resource curse: An illustration from Nigeria (No. 3-139). International Monetary Fund.

WANG, Y., ZHU, Q., & WU, J. (2017). Oil Price Shocks, Inflation, and Chinese Monetary Policy. Macroeconomic Dynamics, 1-28.

World Development Indicators (2021). Available online:




How to Cite

Rotimi, M., Ngalawa, H., & Kutu, A. A. (2022). Asymmetric behavior of oil price shocks and output performance in Africa. JOURNAL OF LIFE ECONOMICS, 9(4), 203–224.



Research Articles