Title: OIL PRICE SHOCKS AND MACROECONOMIC VARIABLES IN NIGERIA
Abstract: Since the 1970s, and at least until recently, macroeconomists have viewed changes in the price of oil as an important source of economic Fluctuations, as well as a paradigm of a global shock, likely to affect many economies simultaneously. Such a perception is largely due to the two episodes of low growth, high unemployment, and high inflation that characterized most industrialized economies in the mid and late1970s.The events of the past decade, however, seem to call into question the relevance of oil price changes as a significant source of economic fluctuations. The reason: Since the late 1990s, the global economy has experienced two oil shocks of sign and magnitude comparable to those of the 1970s but, in contrast with the latter episodes, GDP growth and inflation have remained relatively stable in much of the industrialized world. This work looked at how the shocks have affected Nigeria recommendations were given. Theoretical Issues Aliyu (2009) stated that an oil price increase, all things being equal, should be considered positive in oil exporting countries and negative in oil importing countries, while the reverse should be expected when the oil price decreases. The challenge, however, of the combined effect of hikes in oil prices and exchange rate instabilities on macroeconomic economic stability and economic growth for oil producing nations like Nigeria is really enormous. Akpan (2009) stated that there has been a steep upward trend in the price of crude oil in recent years, reaching a record nominal high in mid-2008. This have led to increasing concern about its macroeconomic implications, both abroad and in Nigeria given that the Nigerian economy is highly vulnerable to oil price fluctuations. He analysed the dynamic relationship between oil price shocks and major macroeconomic variables in Nigeria by applying a VAR approach. The study pointed out the asymmetric effects of oil price shocks; for instance, positive as well as negative oil price shocks significantly increase inflation and also directly increases real national income through higher export earnings, though part of this gain is seen to be offset by losses from lower demand for exports generally due to the economic recession suffered by trading partners. His findings showed a strong positive relationship between positive oil price changes and real government expenditures. Unexpectedly, the result identified a marginal impact of oil price fluctuations on industrial
Publication Year: 2012
Publication Date: 2012-01-01
Language: en
Type: article
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Cited By Count: 7
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