Oil Price Shocks and Their Effects on Mozambican Economy

Ibraimo Hassane Mussagy ,Musibau Adetunji Babatunde

doi:10.7176/jesd/11-4-11

Abstract

In this paper, the oil price shocks and their effects on Mozambican economy is empirically analyzed for the time span covered by 1996:Q1-2012:Q4. The VAR methodology was used and the variables were Real Gross Domestic Product, Wages and Consumer Price Index. The results of the estimations, show a depressive impact on gross domestic product, increase in general the price level and the impact of an oil shock on wages is small and positive, in contradiction to conventional theory. In general, the wages decreases by an average of 1.5 percentage points. The key policy response to the impact of high oil prices is the extent to which governments have passed on the price increases to consumers, or have moderated them with subsidies, tax reductions, or pressure on oil companies to hold down price. Keywords: Oil prices, Mozambique, Vector Auto Regression. DOI: 10.7176/JESD/11-4-11 Publication date: February 29 th 2020

Highlights

Since the 1970s, and at least until recently, macroeconomists have viewed changes in the price of oil as an important source of economic fluctuations in several developed and developing countries
This paper proposes to estimate the effects of oil price shocks on the Mozambican economy on a certain variables such as the real gross domestic product, consumer price index and the wages, relying on an unrestricted vector auto regression methodology (VAR) model
The Augmented Dickey Fuller (ADF) results in Table 1 reveal that oil price (OP), consumer price index (CPI), real output (GDP) and wage (W) are stationary at the first difference in the unit root model that included a constant and the model that included a constant and linear time trend

Summary

Introduction

Since the 1970s, and at least until recently, macroeconomists have viewed changes in the price of oil as an important source of economic fluctuations in several developed and developing countries. Since the late 1990s, the global economy has experienced two oil shocks of a 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. These events, seem to call into question the relevance of oil price changes as a significant source of economic fluctuations. It shows the quarterly average price of a barrel from 1996:Q1-2012:Q4.

Methods

Results

Conclusion