Effect of Crude Oil Price on Macroeconomic Variables: Evidence from Selected African OPEC Member Countries

Abstract

This paper investigated the effect of crude oil price on
macroeconomic variables from five selected OPEC African member
countries which includes; Algeria, Congo, Equatorial Guinea,
Gabon and Nigeria between the period of 1991-2018. The panel
vector autoregressive model was applied to achieve the objective.
The cointegration relationship among our variables was confirmed
by the Johansen Fischer test for cointegration. The impulse response
and variance decomposition analysis under the framework of panel
VAR model revealed that rise in crude oil price appear to possess
some positive influence on economic growth, inflation, money supply
and the short-run exchange rate whereas negative influence on
unemployment and long-run exchange rate in the case of these
countries. These results have given us the chance to claim that all
the macroeconomic series used were exposed to shocks in crude oil
price. Therefore, we recommended that policy makers in these
countries should diversify their economies in order to hinder the
shocks of crude oil price variations and increase the contributions
of non-crude oil sectors in their economies. Accordingly, there
would be resistant to unpredicted shocks in these economies and will
aid in achieving stability in the long-run. Again, there will be support
in economic growth and confidence in domestic currencies that
would ensure that rate of inflation is under control, provision of
employment opportunities and ensure relative supply of money.