|SYMMETRIC AND ASYMMETRIC EFFECT OF OIL PRICE VOLATILITY ON MACROECONOMIC VARIABLES IN NIGERIA|
|Ijomah Maxwell, Nwogwugwu Uche .C., Benedict Uzoechina
|Abstract. This study mainly aims at investigating the symmetric and asymmetric effects of crude oil shocks on key macroeconomic variables for Nigerian economy. The exponential EGARCH (p,q) model was used to estimate the volatility while VAR model was used to estimate the dynamic structural relationships between oil price volatility and macroeconomic variables. Empirical results suggest that volatility in all the selected macroeconomic variables except interest rate, takes long time to die out following a crisis in the oil price market. Symmetry shocks to oil price significantly influence exchange rate, output, unemployment rate and government spending while for the asymmetric specification, both positive and negative oil price granger causes exchange rate of the naira also, positive rather than negative shocks to oil price explain more variations in unemployment rate in the long run.
|Key words: Oil price, Volatility, Macroeconomic Variables, EGARCH model, VAR model.
|. Akinley S.O. and Ekpo, S. (2013) Oil Price Shocks and macroeconomic performance in Nigeria Economia mexicana. Neuva Epoca vol 2 PP 565 – 624 Centro de Investigación Docencia Económicas, A.C. México
. Bernanke, B. S. (1983) “Irreversibility, Uncertainty, and Cyclical Investment”, Quarterly Journal of Economics, 98, 85–106.
. Blanchard, O.J and Gali, J. (2007) “The macroeconomic effects of Oil Price Shocks: Why are the 2000s different from the 1970s?, MIT department of Economics Working Paper No.07-21.
. Bresnahan, T. F. and Ramey V.A. (1992) “Output Fluctuations at the Plant Level.” NBER Working Paper 4105. Cambridge, Mass.: NBER, June.
. Bruno, M. and Sachs, J. (1982) "Input price shocks and the slowdown in economic growth: The case of U.K. manufacturing", Review of Economic Studies, 49, 679–705.
. Burbidge, J. and Harrison, A. (1984) “Testing for the Effects of Oil-Price Rises Using Vector Autoregressions”, International Economic Review 25(2): 459-484.
. EIA (Energy Information Administration) (2009) Country Analysis Briefs on Nigeria, Official Energy Statistics from the United States Government at: http://www.eia.doe.gov/emeu/cabs/OPEC_Revenues/Factsheet.html
. Finn, M. G. (2000) “Perfect Competition and the Effects of Energy Price Increases on Economic Activity,” Journal of Money, Credit and Banking 32: 400-416.
. Gisser, M. and Goodwin, T. (1986) “Crude Oil and the Macroeconomy: Tests of Some Popular Notions”, Journal of Money, Credit and Banking, 18: 95-103.
. Hamilton, J. D. (1983) “Oil and the Macroeconomy since World War II,” Journal of Political Economy 91: 228-248
. Hamilton, J. D. (1988) “A Neoclassical Model of Unemployment and the Business Cycle,” Journal of Political Economy 96: 593-617.
. Hamilton, J. D. (1996) “This is What Happened to the Oil Price-Macroeconomy Relationship,” Journal of Monetary Economics 38: 215-220.
. Hooker, M. A. (1996) “What Happened to the Oil Price-Macroeconomy Relationship?”,Journal of Monetary Economics 38: 195-213.
. Jimenez-Rodriguez, R. and Sanchez, M. (2005) "Oil price shocks and real GDP growth: empirical evidence for some OECD countries."European Central Bank Working Paper No. 362.
. Lee, K., and S. Ni (2002). ― On the Dynamic Effects of Oil Price Shocks: A Study Using Industry Level Data‖, Journal of Monetary Economics, 49, pp. 823- 852.
. Lee, K. S. Ni, and R. A. Ratti (1995) “Oil Shocks and the Macroeconomy: The Role of Price Variability,” Energy Journal 16(4): 39-56.
. Mork, K.A. (1981) "Energy prices, inflation, and economic activity: Editor's overview", In K. A. Mork (Ed.) Energy Prices, Inflation, and Economic Activity. Cambridge, MA: Ballinger Publishing.
. Mork, K. (1989) “Oil Shocks and the Macroeconomy when Prices Go Up and Down: An Extension of Hamilton’s Results”, Journal of Political Economy, 97: 740-744.
. Mork, K. A. O., Olsen, O. and Mysen, H. (1994) “Macroeconomic Responses to Oil Price Increases and Decreases in Seven OECD Countries”, Energy Journal, 15: 19-35.
. Olomola, P.A. (2006) “Oil Price shock and aggregate Economic activity in Nigeria” African Economic and Business Review Vol.4No.2, fall 2006.
|Information about author:|
|FULL TEXT (pdf)|