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Oil Price Shocks and the Macroeconomy of Nigeria: A Non-linear Approach

Author

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  • Aliyu, Shehu Usman Rano
Abstract
Nowadays, the impact of oil price shocks is pervasive as it virtually affects all facets of human endeavor. As such, it is pertinent that we should know the relationship between oil price shocks and the macroeconomy. Therefore, this paper assesses empirically, the effects of oil price shocks on the real macroeconomic activity in Nigeria. Granger causality tests and multivariate VAR analysis were carried out using both linear and non-linear specifications. Inter alia, the latter category includes two approaches employed in the literature, namely, the asymmetric and net specifications oil price specifications. The paper finds evidence of both linear and non-linear impact of oil price shocks on real GDP. In particular, asymmetric oil price increases in the non-linear models are found to have positive impact on real GDP growth of a larger magnitude than asymmetric oil price decreases adversely affects real GDP. The non-linear estimation records significant improvement over the linear estimation and the one reported earlier by Aliyu (2009). Further, utilizing the Wald and the Granger multivariate and bivariate causality tests, results from the latter indicate that linear price change and all the other oil price transformations are significant for the system as a whole. The Wald test indicates that our oil price coefficients in linear and asymmetric specifications are statistically significant.

Suggested Citation

  • Aliyu, Shehu Usman Rano, 2009. "Oil Price Shocks and the Macroeconomy of Nigeria: A Non-linear Approach," MPRA Paper 18726, University Library of Munich, Germany, revised 16 Nov 2009.
    • Handle: RePEc:pra:mprapa:18726
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Magnus Abeng, 2016. "Analysis of the Effect of Oil Price Shock on Industry Stock Returns in Nigeria," EcoMod2016 9285, EcoMod.
    2. Omo Aregbeyen & Ismail Olaleke Fasanya, 2017. "Oil Price Volatility and Fiscal Behaviour if Government in Nigeria," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 5(2), pages 118-134, June.
    3. Neelufer Aslam & Swati Shastri, 2019. "Relationship Between Oil Revenues and Gross Domestic Product of Oman: An Empirical Investigation," International Journal of Economics and Financial Issues, Econjournals, vol. 9(6), pages 195-201.
    4. Oriakhi D.E & Iyoha Daniel Osaze, 2013. "Oil Price Volatility and its Consequences on the Growth of the Nigerian Economy: An Examination (1970-2010)," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(5), pages 683-702, May.
    5. Charles O. Manasseh & Janathan E. Ogbuabor & Felicia C. Abada & Okoro E.U. Okoro & Aja Ebeke Egele & Josaphat U. Onwumere, 2019. "Analysis of Oil Price Oscillations, Exchange Rate Dynamics and Economic Performance," International Journal of Energy Economics and Policy, Econjournals, vol. 9(1), pages 95-106.
    6. Ismail O. Fasanya & Abiodun Adetokunbo & Felix O. Ajayi, 2018. "Oil Revenue Shocks and the Current Account Balance Dynamics in Nigeria: New evidence from Asymmetry and Structural Breaks," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 68(4), pages 72-87, October-D.
    7. Maku Olukayode E. & Ogede Jimoh S. & Osisanwo Bukonla G., 2021. "Oil Price and Macroeconomic Fundamentals in African Net Oil-Exporting Countries: Evidence from Toda–Yamamoto and Homogeneous Causality Tests," Acta Universitatis Sapientiae, Economics and Business, Sciendo, vol. 9(1), pages 102-114, September.
    8. Kashif Zaheer Malik & Haram Ajmal & Muhammad Umer Zahid, 2017. "Oil Price Shock and its Impact on the Macroeconomic Variables of Pakistan: A Structural Vector Autoregressive Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 7(5), pages 83-92.
    9. Chuku, Chuku & Effiong, Ekpeno & Sam, Ndifreke, 2010. "Oil price distortions and their short- and long-run impacts on the Nigerian economy," MPRA Paper 24434, University Library of Munich, Germany.
    10. repec:wsr:wpaper:y:2011:i:071 is not listed on IDEAS
    11. Osaretin Kayode Omoregie & Sodik Adejonwo Olofin, 2020. "Corporate Performance in Nigeria: The Effect of Oil Price and Exchange Rate Fluctuations," International Journal of Economics and Financial Issues, Econjournals, vol. 10(1), pages 170-179.
    12. Olagbaju Ifeolu O & Akinbobola Temidayo O, 2016. "A Non-Linear Analysis of the Oil Price-Exchange Rate Nexus in Nigeria," Journal of Economics and Behavioral Studies, AMH International, vol. 8(4), pages 79-91.
    13. Troug, Haytem & Murray, Matt, 2015. "The Effects of Asymmetric Shocks in Oil Prices on the Performance of the Libyan Economy," MPRA Paper 68705, University Library of Munich, Germany.
    14. Babalola Adedayo Emmanuel* & Akindele Olawale Olamide & Rotimi Olufemi Henry, 2018. "An Empirical Investigation into the Effects of Crude Oil Price on Government Revenue in Nigeria," Sumerianz Journal of Economics and Finance, Sumerianz Publication, vol. 1(1), pages 22-30, 06-2018.
    15. Agya Atabani Adi & Udoh Friday, 2017. "The Impact Of Oil Shock On Nigeria Economy: Asymmetry Effect Analysis," Journal of Social and Economic Statistics, Bucharest University of Economic Studies, vol. 6(1), pages 60-74, JULY.
    16. Motunrayo O AKINSOLA & NM ODHIAMBO, 2020. "Oil Price And Economic Growth Of Oil-Importing Countries: A Review Of International Literature," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 20(1), pages 129-140.
    17. Abimelech Paye Gbatu & Zhen Wang & Presley K. Wesseh, Jr & Isaac Yak Repha Tutdel, 2017. "Asymmetric and Dynamic Effects of Oil Price Shocks and Exchange Rate Fluctuations: Evidence from a Panel of Economic Community of West African States (ECOWAS)," International Journal of Energy Economics and Policy, Econjournals, vol. 7(3), pages 1-13.
    18. Kanu Success Ikechi & Nwadiubu Anthony, 2020. "Global Oil Price Shocks and Effects on Economic Growth: An Econometric Investigation of Nigeria," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 6(4), pages 7-26, October.
    19. Riman, Hodo B. & Akpan, Emmanuel S. & Offiong, Amenawo I, 2013. "Asymetric Effect of Oil Price Shocks on Exchange Rate Volatility and Domestic Investment in Nigeria," MPRA Paper 53282, University Library of Munich, Germany, revised 21 Aug 2013.

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    More about this item

    Keywords

    Oil Shocks; Macroeconomy; Granger Causality; Asymmetry; Vector Autoregressive;
    All these keywords.

    JEL classification:

    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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