Commodity Price Shocks And Macroeconomic Performance In Sub-Saharan Africa

Abstract

This study investigated the relationship between commodity price shocks and output growth in Sub-Saharan African countries using panel data which covered the period between 2005 and 2017. Data for the study were sourced from the World Development Indicators (WDI). Data base of the World Bank, The IMF’S International Financial Statistics (IFM) and Publications of Central Banks of various countries selected. The study employed Generalized Movement Average (GMM) as the estimation technique. Findings from the study showed that positive changes in the prices of export commodities has little positive impact on macroeconomic performance in Sub-Saharan Africa while negative price change has negative and significant impact on macroeconomic performance in Sub-Saharan African countries during study period. Based on these findings, the study therefore concludes that the relationship between commodity price shocks and macroeconomic performance in Sub-Saharan Africa is asymmetric. The study recommends that countries in Sub-Saharan Africa should introduce and implement policies to withstand shocks that may come from commodity price shocks such as economic diversification not only in area of agriculture but also in the area of industrialization and manufacturing.

Modelling the dynamic connectedness among commodity prices, banking sector’s financial soundness, and macroeconomic variables in Ghana

“…Uysal and Adalı 2022). Also, changes in fiscal policy may lead to changes in government spending, taxes, and subsidies, which may affect the overall economic environment (Jena 2017;Cantah 2018;Sanya 2020). Additionally, a depreciation in the exchange rate can lead to higher inflation rates, which can affect the profitability of households.…”

“…Thus changes in global demand and supply affect the prices of these commodities, which can lead to changes in export revenue, terms of trade, and inflation rates etc (Cantah 2018;Sanya 2020;Huang et al 2022). These changes can, in turn, affect the performance of the banking sector and the overall macroeconomic conditions in a country (Abaidoo et al 2021).…”

Trade shocks and labour market resilience in Sub-Saharan Africa: Does the franc zone response differently?

“…In Africa, particularly in Sub-Saharan Africa (SSA), the relationship between commodity prices and macroeconomic performance is paradoxical. This is seen in that when commodity prices increase at international markets, the economic performance of this region barely increases, whereas, when there is fall in commodity prices, their economic performances slowdown greatly (Sanya, 2020). This was seen recently as many of these economies went into recession after the 2014 fall in oil prices.…”