The study investigates the influence of crude oil price shocks on the
macroeconomic performance of Africa’s oil-producing countries. Eight major net oil
producers, namely, Algeria, Nigeria, Egypt, Angola, Gabon, Equatorial Guinea and
Congo Republic are included in the study. Sudan is excluded due to data constraints.
The study covers the period between 1980 and 2016, which represents the periods
with the most boom and bust movements in crude oil prices. The Hamilton Index
(1996) which uses the net oil price increase is applied. The study compares the price
of oil in each quarter with the maximum value observed during the preceding four
quarters. This is used to derive sharp increases and declines in oil prices to capture
oil price shocks. A Panel Structural Vector Auto-Regression model is adopted for
analysis. The results show that the reaction of output to sharp increases and
declines in oil prices differ. It is also observed that structural inflation accompanies
sharp declines in oil prices more than monetary inflation, since both outputs and
investment decline significantly.
Subjects: Economics; Environmental Economics; Industry & Industrial Studies
Keywords: Hamilton Index; crude oil price shocks; output performance