REAL OUTPUT AND OIL PRICE UNCERTAINTY IN AN OIL PRODUCING COUNTRY

Sudden changes in oil prices have been a major concern for countries – oil producing and non-oil producing countries alike. Due to this, we assessed the effects of such an uncertainty on the real output of Nigeria, an oil producing country, during the period 1980:1 to 2014:4. We achieved this objective by using a vector autoregressive model that permits us to decompose oil price uncertainty into positive and negative uncertainties. We then quantified the responses of real output to these uncertainties. Using the conditional variance of the returns in the composite refiners’ acquisition cost of crude oil deflated by US GDP deflator as our measure of oil price uncertainty, we found that a positive uncertainty leads to a decline in real output, while a negative uncertainty leads to a rise in real output. The response of real output to these uncertainties is asymmetric.Sudden changes in oil prices have been a major concern for countries – oil producing and non-oil producing countries alike. Due to this, we assessed the effects of such an uncertainty on the real output of Nigeria, an oil producing country, during the period 1980:1 to 2014:4. We achieved this objective by using a vector autoregressive model that permits us to decompose oil price uncertainty into positive and negative uncertainties. We then quantified the responses of real output to these uncertainties. Using the conditional variance of the returns in the composite refiners’ acquisition cost of crude oil deflated by US GDP deflator as our measure of oil price uncertainty, we found that a positive uncertainty leads to a decline in real output, while a negative uncertainty leads to a rise in real output. The response of real output to these uncertainties is asymmetric

Electricity Consumption, Inflation, and Economic Growth in Nigeria: A Dynamic Causality Test

This paper examines the dynamic causal linkages between electricity consumption and economic growth in Nigeria within a trivariate VECM, for the period 1971-2012. The paper obviates the variable omission bias, and the use of cross-sectional techniques that characterise most existing studies. The results show that there is a distinct causal flow from electricity consumption to economic growth: both in the short run and in the long run. This finding supports the electricity-led growth hypothesis, as documented in the literature. The paper urges policy-makers in Nigeria to implement policies which enhance the generation of electricity in order to engineer economic growth. Appropriate monetary policies must also be put in place, in order to moderate inflation, thus enhancing growth

Does Financial Development Lead to Poverty Reduction in China? Time Series Evidence

The impact of financial development on poverty reduction has received attention in the literature recently. While the connection between financial development and poverty may appear straight forward in theory, in empirics it may be much complicated. This study attempted at empirically assessing the causal links between financial development and poverty reduction in China for the period 1985–2014. The study used the Toda-Yamamoto causality test to avoid pretesting bias that has featured majority of the existing studies. The study utilized two standard proxies for financial development, namely: the domestic private credit by banks as percentage of GDP, and money supply (M2) as percentage of GDP; and a standard proxy for poverty reduction namely: the household final consumption expenditure per capita growth (annual percentage). The study found a bidirectional causal flow between financial development and poverty reduction, implying that the causal flow between these important variables is independent of the proxy for financial development. This means that financial sector reforms and poverty reduction programs are more of “win-win†strategies in the case of China. Therefore policymakers in China should continue to implement robust financial sector reforms and poverty reduction strategies

Assessing the Effects of Housing Market Shocks on Output: The Case of South Africa

This paper assessed the effects of housing market shocks on real output in South Africa over the period 1969Q4 – 2014Q4, by emphasizing the real private consumption channel. The agnostic identification procedure employed in this paper has delivered impulse responses that are overall consistent with the existing literature. The paper appropriately identified housing market shocks as non-monetary housing demand shocks. 20% of the variation in house prices are explained by the housing market shocks. The effects of housing demand shocks on real private consumption are short-lived, explaining why real output responded transitorily to these shocks. Housing demand shocks have managed to explain nearly 13% and 14% variations in real private consumption and real output, respectively, over 20-quarters ahead forecast revision

Electricity Consumption, Inflation, and Economic Growth in Nigeria: A Dynamic Causality Test

This paper examines the dynamic causal linkages between electricity consumption and economic growth in Nigeria within a trivariate VECM, for the period 1971-2012. The paper obviates the variable omission bias, and the use of cross-sectional techniques that characterise most existing studies. The results show that there is a distinct causal flow from electricity consumption to economic growth: both in the short run and in the long run. This finding supports the electricity-led growth hypothesis, as documented in the literature. The paper urges policy-makers in Nigeria to implement policies which enhance the generation of electricity in order to engineer economic growth. Appropriate monetary policies must also be put in place, in order to moderate inflation, thus enhancing growth

Macro Determinants of the Real Exchange Rate in a Small Open Small Island Economy: Evidence from Mauritius via BMA

We assess the robust macro determinants of the real exchange rate in Mauritius under model uncertainty by utilizing Bayesian Model Averaging (BMA). We introduce a broader range of potential macro determinants of the real exchange rate in Mauritius. Then we tackle the issue of model uncertainty when identifying these macro determinants of the real exchange rate by exploring the impact of different priors on the model size, and different priors on model coefficients on the posterior estimates. We identify the real money supply, and the real productivity to be the robust macro determinants of the real exchange rate in Mauritius. Their coefficient signs are also theoretically consistent. The real money supply impact on the real exchange rate negatively, whereas the real productivity impact on it positively. Our results remain robust to different priors on the model size, and to different priors on model coefficients

Real exchange rate misalignments and economic growth in Sub-Saharan African countries

This study examined the effect of real exchange rate misalignments on economic growth in sub-Saharan Africa (SSA) by employing 15 countries. The sample is subdivided into 7 lowincome countries and 8 middle-income countries. The dataset spans 41 years covering the period 1970-2010. The study examined this broad issue in piecewise fashion. In the first part, the study examined the validity of the Balassa-Samuelson Hypothesis (BSH) using a simplified regression model and within-effects estimations. The study found a negative and highly significant coefficient of the relative productivity term for the two subsamples (i.e. low-income SSA countries and middle-income SSA countries), in addition to the full sample. Thus, the study found a well-established BSH for the SSA countries considered. Second, the study examined the impact of the real exchange rate undervaluation on economic growth using a standard regression model with key control variables. The study constructed an index of undervaluation, following Rodrik (2008). The study also constructed a Hodrick- Prescott based undervaluation index in order to evaluate the robustness of the main undervaluation index. Generally, the study found undervaluation to promote growth and overvaluation to reduce it. The study found the effect of undervaluation on economic growth to weaken as countries migrate from the low-income bracket to the middle-income bracket. Moreover, the study examined whether the choice of the undervaluation measure mattered. The study found the choice of the undervaluation measure to matter. The Rodrik-type index appeared to overestimate the size of the impact of undervaluation on economic growth. Finally, the study examined whether the impact of undervaluation on growth was linear. The evidence showed that the impact of undervaluation on growth was linear, at least, for this study. The linear impact of real exchange rate movements on economic growth implied that undervaluation enhanced economic growth just as overvaluation hindered it.EconomicsD. Phil. (Economics

Exchange Rate Undervaluation and Sectoral Performance of the South African Economy

The paper uncovers the channels through which real exchange rate undervaluation influences the performance of the South African economy. We decompose the South African economy into three sectors, namely: agriculture, industry, and service. Using the OLS (with Newey-West and robust standard errors), and GMM estimation techniques; an annual time series data covering the period 1962-2014; and a standard regression model for each sector, we find: (i) real exchange rate undervaluation to exert positive impact on economic performance by enhancing agricultural sector, and industrial sector performance; (ii) real exchange rate undervaluation to exert a negative impact on economic performance by reducing the performance of the service sector