Oil Price Fluctuations and Exchange Rate in Selected Sub-Saharan Africa countries: A Vector Error Correction Model Approach
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This study employs the Johansen cointegration and the vector error correction model (VECM) to assess the dynamic relationship that exists between oil
price fluctuations and the real exchange rate in selected Sub-Saharan Africa countries from January 2004 to December 2017. The result of the monthly
data analysis provides evidence to support a cointegration between oil prices and the real exchange rate in sub-Saharan oil dependent nations. The
results of the study established a long-run equilibrium connection between fluctuations in oil price and the real exchange rate. Importantly, the study
demonstrates the significant power of oil prices to predict the movement of real exchange rates in Nigeria, Angola, the Republic of Congo, Equatorial
Guinea and Gabon. This study has implications not only for investors and industry leaders but also for policymakers responsible for the growth and
stability of the economy. The results of this study also attest to the need for urgent economic diversification to other sectors of the economy both to
reduce the negative influence of oil price fluctuations and to boost economic growth.
Keywords
HF Commerce, HG Finance