Threshold Effects of Oil Price and Oil Export on Trade Balance in Africa

Authors

  • Umar Bala Department of Economics, Faculty of Social Sciences, Bauchi State University, Gadau, Nigeria
  • Lee Chin Department of Economics, Faculty of Economics and Management, University Putra Malaysia, 43400 UPM Serdang, Selangor, Darul Ehsan, Malaysia
  • Ghulam Mustafa Department of Economics and Business Administration, University of Education, Lahore, Pakistan

DOI:

https://doi.org/10.52223/jei4012203

Keywords:

Oil price, Oil export, OPEC members, Trade balance, Threshold effects

Abstract

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.

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Published

2022-02-09

How to Cite

Bala, U., Chin, L. and Mustafa, G. (2022) “Threshold Effects of Oil Price and Oil Export on Trade Balance in Africa”, Journal of Economic Impact, 4(1), pp. 14–27. doi: 10.52223/jei4012203.

Issue

Section

Research Articles
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