![]() Moreover, the literature suggests the implementation of energy pricing model that can promote consumption as well as economic output. Also, electricity prices and electricity consumption are found to be bi-directional. The empirical evidence suggested that bi-directional causality exist between electricity consumption and economic growth, Similar to Matthew et al. Osigwe and Arawomo (2015) examined the granger causality of the variables under the error correction model. Studies have discussed energy prices, GDP and energy consumption relationship in different economies. The macroeconomic framework of the selected countries varies in respect to the stylized facts: net import of oil per GDP, oil dependence in the energy mix, efficiency of energy production, and level of exports, revenues and savings from international trade. The paper contributes to knowledge by highlighting policies that can maximize the positive impacts and mitigate the negative effect of the net oil-importing poor countries. This is an important study for poverty alleviation for organisations, and governments to mitigate the possible implications of the global oil price shock on the key macroeconomic components of net-oil importing poor countries in order to improve the balance of payment and manage debt crises. The World Bank group in collaboration with International Monetary Fund (IMF), and African Development Bank are seeking to end extreme poverty by 2030. The Gambia, Sierra Leone, and Liberia are categorized as highly indebted poor countries (HIPC) according to The World Bank, 2018a, The World Bank, 2018b. The paper selected three low-income countries (Sierra Leone, Liberia and The Gambia) out of the 39 countries listed in the IMF debt relief initiative ( IMF, 2016) and a low-middle income country, Cape Verde ( The World Bank, 2018a, The World Bank, 2018b). Therefore, the aim of the research is to investigate the effects of oil price shock on oil-importing poor West African countries. Studies have analysed the impact of oil price shocks on developed and developing economies, although there is scarce research of this nature targeted at high indebted poor countries. The increase in oil price generally negative impact in GDP causing increase in unemployment, higher consumer prices and reduced welfare for citizens. However, studies have examined oil-importing developing countries such as Bangladesh, El Salvador, Kenya, Nicaragua, Tanzania and Thailand in ( Sachez, 2011). Several empirical studies on the impact of oil price shocks on economic components have been conducted for oil-importing developed economies such as United States, European Union, and Japan as in ( Kurihara, 2015) and ( Akira, 2012), where oil price increase causes economic growth. The rising of energy prices and the anticipated increase in global consumption growth is likely to place net-importing economies, especially Africa in a tight position. Energy Information Administration (2017) forecast world energy consumption to grow by 28% between 20. Demand keeps on increasing in the Western world and in the Middle East such as Brazil, China, and India etc. In July 2014 the average price for Brent was $45 USD per barrel rose up to $80 USD per barrel in May 2018 according to Adam (2018). Global crude oil prices have recently been on increase due to the cuts by the oil cartel OPEC, led by Saudi Arabia and Russia that has balance the oil market forces of demand and supply. ![]() This is observed by the global economic shocks caused by the price fluctuations of the most consumed energy resource which is oil. The development of the global energy market dating back from 1970 period has been dramatic with significant impact on global economy and politics. Recent studies of this relationship on small oil-importing countries ( Abimelech et al., 2017), claimed that rising oil prices will stimulate economic growth, which is not consistent with other studies that rising oil prices have an adverse effect on net oil-importers ( Yanagisawa, 2012 Lemazoshvili, 2014 Shabhaz et al., 2017). The Arab oil embargo of 1973–1974, which caused the first oil shock, has triggered several discussions on the causal link between oil price and macroeconomic activities. ![]() In addition, high oil price volatility increases uncertainty regarding cash flows which can be challenging for government in policy decisions. However, high oil prices for net oil-exporters improves the general balance of payment due to the increase in oil revenue. High oil prices for net oil-importing countries could lead to high import costs with an adverse effect on GDP, exchange rate, inflation and balance of payment. Oil price fluctuations affect economies differently depending on whether they are net oil-importers or net oil-exporters. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |