MACROECONOMICS OF OIL PRICE VOLATILITY
 /  MACROECONOMICS OF OIL PRICE VOLATILITY

MACROECONOMICS OF OIL PRICE VOLATILITY

Rolle Remi Ahuru and Uffie Edison James
Abstract
Nigeria has a long history with oil. Among the challenges associated with oil, frequent changes in the
prices of oil have produced macro-fiscal risk for the country. This study attempts to verity the direct and
indirect impact of oil price volatility on Nigeria’s economy. The indirect impact attempts to trace the
impact of oil price volatility on selected macroeconomic variables through public expenditure, while the
direct impacts tied the same selected macroeconomic variables directly on oil price volatility. This study
utilized the methodology of Vector Autoregression and dynamic simulations of forecasting error variance
decomposition. In addition, the pair wise Granger causality is also deployed. The study finds out that oil
price volatility significantly stimulate most of the macroeconomic variables and Nigeria’s public
expenditure. Furthermore, public expenditure impacts on most of the macroeconomic variables. The
study recommends that efforts should be made to safeguard both the quantity and quality of public
expenditure through appropriate revenue policy measure, promoting sound fiscal institutions, promote
budget flexibility and diversification of the revenue base.

Journal Article
PDF
Creative Commons LicenseCreative Commons license
Economics
Macroeconomics
Price volatility, public expenditure, macroeconomy, variance decomposition
Christian Bassey
18th April, 2018
18th April, 2018
http://oer.mciu.edu.ng/wp-content/uploads/2015/04/Rolle-Remi-Ahuru-13.pdf


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