Oil Price Fluctuations and Exchange Rate in Selected Sub-Saharan Africa Countries: A Vector Error Correction Model Approach

Ehikioya, Benjamin Ighodalo; Omankhanlen, A. E; Babajide, A. A; Osuma, Godswill Osagie; Omodero, Cordelia Onyinyechi

doi:10.32479/ijeep.9822

Cited by 10 publications

(6 citation statements)

References 29 publications

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“…The fluctuations of crude oil price directly transmit into economic output through real exchange rate. A related study by Ehikioya et al (2020) where Johansen Cointegration techniques were used to explore the relationship between prices of crude oil and real exchange rate in selected sub-Saharan African countries from 2004 to 2017. The results obtained from the study showed that fluctuations in the prices of crude oil predicted real exchange rates movement in countries like Angola, Congo, Equatorial Guinea, Nigeria and Gabon.…”

Section: Review Of Past Studies On Crude Oil Price and Real Exchange ...mentioning

confidence: 99%

Crude Oil Price and Macroeconomic Variables Nexus: Impact on Nigeria’s Economic Growth

I.I.¹,

F.J.²,

O.T.³

2022

African Journal of Mathematics and Statistics Studies

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It is no longer news that Nigeria runs a single-product economy where the only source of revenue for the country is crude oil exportation. Changes in the prices of crude oil in the international market continue to have severe implications on the country's economy's growth rate, exchange rate and even inflation. This study seeks to investigate the impact of four key variables (crude oil price, real exchange rate, inflation and population) on Nigeria’s economic growth. This is to give necessary policy makers a clear direction on the inter-relationship of these explanatory variables on the economic growth of Nigeria. This study employs annual time series data obtained from the World Development Indicator (WDI). Augmented Dickey Fuller (ADF) test was used to determine the presence of unit roots among the variables before the Johansen Before the Johansen Cointegration test and Vector Error Correction Model (VECM) were carried out to determine the co-integration and relationships existing among the variables. The study reveals that all the variables were all integrated at the first order I which necessitated the presence of a long-run of a long-run relationship among the variables; this is further confirmed by the Johansen Cointegration test carried out. The findings of this study clearly show that the explanatory variables used in this study are all significant on the response variable (GDP) in both long-run and short-run. The rise and fall in the prices of crude oil have negatively affected Nigeria’s economic growth, real exchange rate and are equally responsible for the inflationary increase in the country in the long run.

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Section: Review Of Past Studies On Crude Oil Price and Real Exchange ...mentioning

confidence: 99%

Crude Oil Price and Macroeconomic Variables Nexus: Impact on Nigeria’s Economic Growth

I.I.¹,

F.J.²,

O.T.³

2022

African Journal of Mathematics and Statistics Studies

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“…To preserve profitability in response, businesses may use cost-cutting strategies, such as lowering labor costs through layoffs or hiring freezes (Ghosh, 2021). Furthermore, higher oil prices may prompt firms to invest in energysaving technologies or alternative energy sources, which can lead to structural changes in the labor market, such as shifts in employment from energy-intensive industries to cleaner and more sustainable sectors (Ehikioya et al, 2020). Conversely, when oil prices decline, businesses may experience cost savings, which can translate into higher profit margins and increased investment in expansion and hiring (Elder & Payne, 2023).…”

Section: Empirical Literature Reviewmentioning

confidence: 99%

Factor Input Prices and Unemployment in Uganda

Musiita,

Kijjambu,

Katarangi

2024

JEBS

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Examining the impact of input costs on unemployment in Uganda, this study employed an ARDL model based on the Efficiency Wage Theory. Analyzing annual data from 1987 to 2019 and controlling for economic size and currency value, the research found that lending interest rates, real exchange rates, and GDP have a short-term negative impact on unemployment, suggesting an initial rise. However, the study highlights a positive long-run relationship between these factors and unemployment, indicating their potential to contribute to lower unemployment over time. Interestingly, no significant short-run or long-run effect of global crude oil prices on Uganda's unemployment was identified. These findings suggest that while central bank policies promoting lower interest rates can encourage short-term investment and potentially lower unemployment, long-term economic growth is also crucial. Furthermore, the lack of impact from oil prices underscores the need for Ugandan policymakers to diversify the economy beyond oil dependence for sustainable unemployment reduction.

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“…Vochozka et al (2020) investigated the impact of international crude oil prices on the EUR/USD exchange rate by using neural networks and found that Brent crude oil prices significantly impact the Euro-USD exchange rate and therefore can be predicted accurately. Ehikioya et al (2020) investigated the relationship between oil price fluctuations and real exchange rates in sub-Saharan African countries on the data from 2004 to 2017 by employing the Johnson cointegration and vector error correction model. The authors found a dynamic relationship between oil prices and the exchange rate in sub-Saharan countries, Nigeria, Angola, Equatorial Guinea, Gabon, and the Republic of Congo.…”

Section: Association Between Oil Prices and Exchange Ratesmentioning

confidence: 99%

The Relationship between Oil Prices and Exchange Rate: A Systematic Literature Review

Siddiqui

Ahmed

Naushad

et al. 2023

IJEEP

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Oil is among the enormously vital and most traded commodities globally, involving many forex transactions in the face of various types of shocks attributable to geopolitics, supply, demand, market crisis, etc. This study uses a systematic literature review approach to explore the Literature from the SCOPUS database considering the relationship between oil prices and exchange rates by analyzing the papers from 1998 to 2022 and includes the final 123 papers. This study emphasizes three objectives; Literature developed so far, standard methodologies and findings, and the research gaps which can be pursued in further studies. Findings show that vast literature is developed around these variables and sub-topics in various dimensions, such as the stock market, gold prices, economic growth, etc. Research around the variables has increased in the recent past, indicating the continued relevancy of the relationship. However, it can be due to increased access to higher education and research. This study also finds the gap in the literature and has implications for the policymakers in monetary and fiscal policy planning, as well as investors across the globe in making portfolio management strategies.

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Oil Price Fluctuations and Exchange Rate in Selected Sub-Saharan Africa Countries: A Vector Error Correction Model Approach

Cited by 10 publications

References 29 publications

Crude Oil Price and Macroeconomic Variables Nexus: Impact on Nigeria’s Economic Growth

Crude Oil Price and Macroeconomic Variables Nexus: Impact on Nigeria’s Economic Growth

Factor Input Prices and Unemployment in Uganda

The Relationship between Oil Prices and Exchange Rate: A Systematic Literature Review

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