Abstract
This study assesses the effect of world oil price shocks on Uganda’s official development assis-tance using Structural Vector Autoregressive Model (SVAR). The results in this study show in-significant pass-through effect of world oil price shocks to Uganda’s Official Development As-sistance received in the period under the study. The policy implication in this study is that Offi-cial Development Assistance received by Uganda is independent of world oil price shocks.
Highlights
The relationship between oil price shocks and economic activity has become a center of interest to many researchers around the world and the recent decline of oil prices has even amplified the interest of many scholars in this area (Baffes et al, 2015; Suleiman, 2013).Baumeister and Kilian (2016), urged that economic models of oil markets imply that the price of oil, all else equal, depends on the state of the global business cycle and global oil production
The policy implication in this study is that Official Development Assistance received by Uganda is independent of world oil price shocks
LODA: Log of Official Development Assistance Received by Uganda; LGOVTEXPEND: Log of Government final consumption expenditure; LGDP: Log of Gross Domestic Product (GDP); LWOILPRICE: Log of world oil prices
Summary
The relationship between oil price shocks and economic activity has become a center of interest to many researchers around the world and the recent decline of oil prices has even amplified the interest of many scholars in this area (Baffes et al, 2015; Suleiman, 2013). When negative consequences of world oil price shock strike economies, Government of developing countries often seek alternative sources of funds which may include official development assistance to stabilize their economies. This has been explained in the conceptual framework in figure 1 below in Arrow 4. Oil price increase is seen to affect the output of developing economies with oil-importing countries like Uganda seeking more development assistance to boost the economy, provide cheaper social services and cover the deficit in budgets. According to Bank of Uganda (2017), debt vulnerability indicators show that Uganda's debt may be moving from a level of low to moderate risk of distress
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