Oil Price Distortion and Their Impact on Algerian Macroeconomic

Abstract

The aim of this study is to investigate the impact of Oil Prices distortion on Algerian Macroeconomics during the period (1980 to 2011). Using a Vector Error Correction Model (VECM); the impact of oil price fluctuation on five macroeconomic variables was examined. The results show that Oil Prices have no important Impact on the most variables during the short term with the exception that they have a positive effect on inflation and negative effect on real effective exchange rate. The result of Variance Decomposition analysis VD is consistent with the Impulse Response Function IRF in that there is a Positive Impact in Long-term of Oil Prices on The RGDP and INF. On the other hand; there is a Negative Impact on REER and UNE; with no effect at all on M2.Finally; The Study Recommends the importance of adopting a policy that allows reducing the dependence on the Oil Sector through diversification of income sources which; in turn; helps to raise real GDP; absorb Unemployment in The Local Economy; and reduce Inflationary pressures.

The Effects of Oil Price Shocks on Economic Growth of Oil Exporting Countries: A Case of Six OPEC Economies

“…The findings are contrary to previous researches carried out by Olomola (2006, Nikbakht (2010, Bouchaour and Al-Zeaud (2012).…”

“…The findings pertaining to the significant relationship between oil price shocks and inflation rate in Iran have been supported by the studies carried out by Ito (2008 andLorde, Jackman and Thomas (2009), Arinze (2011), Bouchaour and Al-Zeaud (2012Shaari, Hussain and Abdullah (2012). Moreover, the findings of the study reveal that the effect of oil shock on inflation rate is statistically significant negative at the 10% level in Venezuela.…”

“…In this study the annual data on four macroeconomic indicators (inflation, GDP growth, exchange rate and investment) of six OPEC economies have been used for analysis over the period 1980 to 2013. The empirical findings of the study suggest that oil price shock has significant negative effect on Algerian GDP growth which negates the study conducted by Bouchaour and Al-Zeaud (2012). Moreover, the study indicated significant positive impact of oil shock on GDP growth of Venezuela.…”

“…High oil prices lead to real exchange rate appreciation of the oil exporting economies, making local products more expensive and increasing the demand for foreign products; as a result the agricultural and manufacturing sectors of oil exporting countries suffer 1 Student, Institute of Management Sciences 2 Lecturer, Institute of Management Sciences which in turn gives rise to Dutch disease and thus, has adverse effects on economic growth (Olomola, 2006). Oil price fluctuations lead to uncertainty in inflation rate which adversely affect the economic growth of oil exporting countries (Arinze, 2011;Bouchaour & Al-Zeaud, 2012;Shaari, Hussain & Abdullah, 2012). However, Olomola (2006) argued that there has been no impact of oil price shocks on inflation.…”

“…However, other studies have focused on the effects of oil price changes on macroeconomic variables of the individual oil exporting economies like in the work of Olomola (2006), Ito (2008 and, Farzanegan and Markwardt (2009), Lorde, Jackman and Thomas (2009), Umar and AbdulHakeem (2010), Mordi and Adebiyi (2010), Mehrara, Maki and Tavakolian (2010), Mendoza and Vera (2010), Mehrara (2011), Arinze (2011), Eltejaei and Afzali (2012 ), Bouchaour and Al-Zeaud (2012), Adedokun (2012), Garkaz, Azma and Jafari (2012), Shaari, Hussain and Abdullah (2012), Rezazadehkarsalari, Haghiri, and Behrooznia (2013); only few researches have been conducted on impact of oil shock on group of oil exporting countries such as the work of Mehrara (2008), Lorde, Jackman and Thomas (2009), Nikbakht (2010), Monjazeb, Souri and Shahabi (2013). Therefore this study aimed at filling this gap; the specific objective of the research was to estimate the impacts of oil shocks on economic/output growth of oil exporting economies.…”