Open AccessThreshold Effects of Oil Price and Oil Export on Trade Balance in Africa
Author(s) -
Umar Bala,
Chin Lee,
Ghulam Mustafa
Publication year - 2022
Publication title -
journal of economic impact
Language(s) - English
Resource type - Journals
eISSN - 2664-9764
pISSN - 2664-9756
DOI - 10.52223/jei4012203
Subject(s) - cointegration , economics , balance of trade , depreciation (economics) , oil price , exchange rate , international economics , effective exchange rate , monetary economics , econometrics , capital formation , financial capital , economic growth , human capital
The impact of various macroeconomics variables on trade deficit has been studied in large OPEC (e.g., United Arab Emirates and Kingdom of Saudi Arabia); however other African countries are still needed to be studied. This study uses the transmission oil price (OP) changes to various economic sectors to examine the threshold effects of OP and oil export on trade balance in African OPEC members (Algeria, Angola, Libya and Nigeria). This study applied Pedroni cointegration test to establish the cointegration relationship among different macroeconomics variables by using three different proxies of OP. The dynamic panel models were used to examine the long-run impact of OP changes and threshold analysis. The study found that increase in OP and oil export positively encouraged import while exchange rate depreciation is significantly discouraged import. The study found that the threshold effect of oil export on the trade balance, when oil export is above a certain threshold, the impact is higher than below threshold. The aforementioned countries have to take into account that there is a threshold level and can increase oil export to improve the trade balance.