Mahmud, Hassan (2009): Oil Price Shocks and Monetary Policy Aggregates in Nigeria: A Structural VAR Approach.
Download (469kB) | Preview
Studies have shown that the impact of oil price volatility varies significantly across countries and within the different sectors of a particular economy. The impact vary according to the prevailing state of an economy: whether the economy is a net importer or exporter of oil; the exchange rate regime; monetary policy framework; the vulnerability of the key sectors of the economy and the degree of openness of the economy.
In this study, we have used both restricted and unrestricted structural VAR models to decompose the impact of oil price shocks. Using a seven-variable VAR matrix which include monetary policy aggregates, we forecast the impact of a one standard deviation innovation to oil price on inflation rate, money supply, interest rate, government expenditure, GDP per capita growth rate, exchange rate and manufacturing output over a ten-year period. We imposed identification restrictions on the VAR model to identify the structural parameters of the seven equations and show the variance decomposition analysis.
The results shows that the second-round effects of oil price shocks may be transmitted to the other sectors of the economy through the government expenditure - inflation rate channels with significant direct impact on the real sector and other monetary aggregates.
|Item Type:||MPRA Paper|
|Original Title:||Oil Price Shocks and Monetary Policy Aggregates in Nigeria: A Structural VAR Approach|
|Keywords:||Oil Price Shocks; Monetary Policy; Vector autoregressive model|
|Subjects:||E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics
|Depositing User:||HASSAN MAHMUD|
|Date Deposited:||18. Oct 2010 14:49|
|Last Modified:||01. May 2015 10:55|
Aguiar-Conraria L and Y. Wen, (2007): ‘Understanding the Large Negative impact of Oil Shocks.’ Journal of Money, Credit and Banking, vol. 39, pp 925-944.
Akaike H., (1974): ‘A New Look at the Statistical Model Identification,’ IEEE Transactions on Automatic Control, vol. 19(6), pp 716-723.
Akaike H., (1981): ‘Likelihood of a Model and Information Criteria.’ Journal of Econometrics, vol. 16, pp 3-14.
Akaike H., (1992): ‘Information Theory and an Extension of the Maximum Likelihood Principle.’ vol. 1, pp 610-624, in Breakthroughs in Statistics, edited by S. Kotz and N. L. Johnson, London,
Balke, Nathan S, Stephen P.A. Brown, and Mine Yucel (1999): ‘Oil Price Shocks and the US Economy - Where Does the Asymmetric Originates’? Working Paper, Federal Reserve Bank of Dallas.
Barsky, Robert B and Lutz Kilan (2002): ‘Oil and the Macroeconomy since the 1970s’, Journal of Economic perspective, vol .18 (4), pp115 - 134.
Bjornland H. C., (1998): ‘The Economic Effects of North Sea Oil on the Manufacturing Sector.’ Scottish Journal of Political Economy, vol. 45(5), pp 553-585.
Blanchard O. J. and D. Quah, (1989a): ‘The Dynamic effects of aggregate Demand and Supply disturbances’, America Economic Review vol. 79 (4), pp 655 - 733.
Blanchard O. J. and R. Perotti, (2002): ‘An Empirical characterization of the dynamic effects of changes in Government spending and taxes on Output’, Quarterly Journal of Economics.
Brischetto, Andrea and Graham Voss (1999): ‘A Structural Vector Autoregressive model of monetary policy in Australia.’ Reserve Bank of Australia, Research Discussion paper, No. 1999-11.
Burbidge, J. and A. Harrison (1994): ‘Testing for the Effects of Oil-Price Rises Using Vector Autoregression’, International Economic Review 25 459-484.
Cunado, Juncal and Fernando Perez de Gracia (2003): ‘Do Oil Prices Shock Matter ? Evidence from some European Countries’, Energy Economics Journal, vol. 25 pp 137 - 154.
Cushman, David O and Tao A Zha (1997): ‘Identifying Monetary Policy in a small open economy under flexible exchange rates’, Journal of Monetary Economics, vol. 38 (3), pp 433 - 448.
Dickey, D. A. and W. A. Fuller, (1979): ‘Distribution of the Estimators for Autoregressive Time Series with Unit Root.’ Journal of the American Statistical Association, vol. 74, pp 427-431.
Dickey, D. A. and W. A. Fuller, (1981): ‘Likelihood Ratio Statistics for Autoregressive Time Series with Unit Root.’ Econometrica, vol. 49. pp 1057-72.
Dungey M. and A. Pagan, (2007): ‘The Identification of Fiscal and Monetary Policy in a Structural VAR., Center for Applied Macroeconomic Analysis, CAMA Working Paper Series No. 29.2007.
Hamilton J. D., (1996): ‘This is what Happened to the Oil Price/Macroeconomic Relation.’ Journal of Monetary Economics, October, 1996.
Hamilton J. D.,(1998): ‘Oil and the Macroeconomy since World War II’, Journal of Political Economy, vol. 96 pg 228-248.
Hamilton, J.D.(1999): ‘A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle,” Econometrica 57: 357-384.
Hamilton J. D., (2003): ‘What is an Oil Shock ?’ Journal of Econometrics, vol. 113, pp 363-398.
Hamilton J. D., (2004): ‘Oil Shock and Aggregate Macroeconomic Behavior: The Role of Monetary Policy.’ Journal of Money, Credit and Banking, vol. 36,pp 265-286.
Hooker, M (1999): ‘Are Oil Shock Inflationary ?: Asymmetric and nonlinear specifications versus change in Regime’, Federal Reserve Board, mimeo.
Jimenez-Rodriguez R. and M. Sanchez (2005): ‘Oil Price Shocks and Real GDP Growth: Empirical Evidence for some OECD Countries.’ Applied Economies,vol. 37, pp 210-228.
Ng, S. and P. Perron, (2001): ‘Lag Selection and the Construction of Unit Root Tests with Good size and Power.’ Econometrica, vol. 69. pp 1519-1554.
OPEC Annual Statistical Bulletin. (1996 - 2008): ‘Organization of the Petroleum Exporting Countries (OPEC), Geneva, Switzerland.
Perron P., (1989): ‘ The Great Crash, the Oil Price Shock and the Unit Root Hypothesis.’ Econometrica, vol. 57(6), pp 1361-1401.
Sims, Christopher A., (1980): ‘Macroeconomics and Reality’, Econometrica vol. 48 (1), pp 1-48.