Dynamic relationship between oil price and macroeconomic variables: evidence from oil exporting and oil importing countries in Africa.

This study examines the asymmetric long-run and short-run relationship between oil price and key macroeconomic variables, within the context of net oil-exporting and importing countries in Africa. Using quarterly data ranging from 1996(Q1) to 2016(Q4), panel ARDL estimation is carried out to analyse how asymmetric changes in oil price affect macroeconomic activities in African countries and whether the effects are similar or different in oil importing and exporting African countries. The results show significant positive response of GDP to oil price in these countries, in both the long- and short-run; meanwhile, the response of GDP to oil price is negative and significant in net oil-importing countries, again in both the long- and short-run. In the long-run, interest rate responded significantly and positively to oil price, in both net oil-exporting and importing countries; whereas the short-run response is insignificant in both exporters and importers. The Granger-causality test shows that causality runs from oil price, to interest rates and exchange rates in both net oil-exporting and importing countries. This study recommends significant approaches and strategies, particularly in the form of effective and efficient short-run and long-run economic policies, which may help in shielding macroeconomic variables from oil price shocks. Such policies and strategies include not only diversification of economic activities - through exporting non-oil products and increasing solar energy usage to reduce dependence on crude oil - but also to enhance manufacturing, infrastructure and agricultural development to enable an increase in foreign earnings and GDP growth. This study recommends the use of mixed-methods approaches in future research, so as to incorporate other exogenous factors - political, social, environmental and institutional. This would help to give further insight on oil price-macroeconomic relationship in the context of African countries