The impact of oil price shocks on economic growth in Algeria

Author/s Kamel Malik Bensafta
Publishing Year 2023 Issue 2022/2
Language English Pages 20 P. 63-82 File size 335 KB
DOI 10.3280/EFE2022-002004
DOI is like a bar code for intellectual property: to have more infomation click here

Below, you can see the article first page

If you want to buy this article in PDF format, you can do it, following the instructions to buy download credits

Article preview

FrancoAngeli is member of Publishers International Linking Association, Inc (PILA), a not-for-profit association which run the CrossRef service enabling links to and from online scholarly content.

In this study, we investigate the consequences of oil price shocks on Algerian economic growth, both on an aggregated and a disaggregated level. We adopt the method used in (Kilian, 2009) in which global oil supply shocks, global demand shocks, and anticipated demand shocks are defined. We use a two structural VAR models. The first model identifies shocks to oil prices using monthly data on oil production, oil real prices, and indicators of global eco- nomic activity. The second model describes the dynamics of a set of macroeconomic varia- bles: real overall GDP, hydrocarbon GDP, agricultural GDP, construction GDP, and interna- tional trade variables. To grasp the impact of oil shocks on sectoral growth, the model is aug- mented via three external shocks identified in the first stage. Our results are twofold. First, they show the significance of the oil price shocks’ impact on the Algerian economy. Second, they indicate an asymmetry in this impact. Negative shocks to oil prices have depressive ef- fects on economic activity as a whole, including the non-hydrocarbon sector. We detect a delay-effect; global demand shocks affect economic sectors after 5-7 quarters, whereas oil price shocks affect the hydrocarbon sector after 1-2 quarters only.

Keywords: oil price shocks, structural var, disaggregated growth, Algeria, oil exporting coun try.

Jel codes: C32, E32, Q43, F43, O55

  1. Barlet, M., Crusson, L. (2009). How Have Oil-Price Changes Impacted French Economic Growth? Economie prevision, 188(2): 23-41.
  2. Ajmi, A., Rangan G., Babalos V., Hefer, R. (2015). Oil Price and Consumer Price Nexus in South Africa Revisited: A Novel Asymmetric Causality Approach. Energy, Exploration & Exploitation, 33(1): 63-74. DOI: 10.2307/1391823
  3. Alquist, R., and Lutz Kilian (2010). What Do We Learn from the Price of Crude Oil Futures? Journal of Applied Econometrics, 25: 539-73.
  4. Arezki R., Kazimov, K., Hamilton, K. (2012). Resource Windfalls, Macroeconomic Stability and Growth: The Role of Political Institutions. IMF. -- WP/Issues/2016/12/31/Resource-Windfalls-Macroeconomic-Stability-and-Growth-The- Role-of-Political-Institutions-24979.
  5. Barsky, R. B., Kilian, L. (2004). Oil and the Macroeconomy since the 1970s. Journal of Eco- nomic Perspectives, 18: 115-34.
  6. Bates, R. H., Block, S. A., Fayad, G., Hoeffler, A. (2013). The New Institutionalism and Af- rica. The Journal of African Economies, 22(4). -- publications/new-institutionalism-and-africa.
  7. Bénassy-Quéré, A., Mignon, V. (2005). ‘Pétrole et Dollar: Un Jeu à Double Sens’. La Lettre Du CEPII, no. 250.
  8. Benramdane, A. (2017). Oil Price Volatility and Economic Growth in Algeria. Energy Sources, Part B: Economics, Planning, and Policy, 12(4): 338-43. DOI: 10.1080/15567249.2015.1128015
  9. Bensafta, K. M. (2020). The Impact of Income on Energy Demand in the Context of Energy Transition: The Case of Algeria. International Journal of Energy, Environment and Eco- nomics, 28(3): 193-212.
  10. Berument, M., Ceylan, N., Dogan, N. (2010). The Impact of Oil Price Shocks on the Eco-nomic Growth of Selected MENA Countries. The Energy Journal, 31(1): 149-76.
  11. Blanchard, O. J., Riggi, M. (2013). Why are the 2000s so different from the 1970s? A struc- tural interpretation of changes in the macroeconomic effects of oil prices. Journal of the European Economic Association, 11(5): 1032-52.
  12. Bruno, M., Sachs, J. (1982). Energy and Resource Allocation: A Dynamic Model of the “Dutch Disease”. The Review of Economic Studies, 49(5): 845-59. DOI: 10.2307/2297191
  13. Burbidge, G., Harisson, A. (1984). Testing for the Effects of Oil-Price Rises Using Vector Autoregressions. International Economic Review, 25. DOI: 10.2307/2526209
  14. Chisadza, C., Dlamini, J., Gupta, R., Modise, Mampho P. (2016). The Impact of Oil Shocks on the South African Economy. Energy Sources, Part B: Economics, Planning, and Pol- icy, 11(8): 739-45. DOI: 10.1080/15567249.2013.781248
  15. Coudert, V., Couhard, C., Mignon, V. (2010). Taux de Change Des Pays Exportateurs de Matières Premières. L’importance Des Termes de l’échange et de La Monnaie d’ancrage. Revue Économique, 61: 499-509.
  16. Cushman, D.O., Zha, Tao (1997). Identifying Monetary Policy in Small Open Economy under Flexible Exchange Rates. Journal of Monetary Economics, 39: 433-48. DOI: 10.1016/S0304-3932(97)00029-9
  17. Dalsgaard, T., Andre, C., Richardson, P. (2001). Standard Shocks in the OECD Interlink Model. September. --
  18. Darby, M. R. (1982). The Price of Oil and World Inflation and Recession. American Economic Review, 72(4): 738-51. --
  19. Dohner, R. S. (1980). Energy Prices, Economic Activity, and Inflation : A Survey of Issues and Results. Energy Prices, Inflation, and Economic Activity, Energy prices, inflation, and economic activity. Cambridge., MA: Ballinger, pp. 7-41.
  20. Edelstein, P., Kilian, Lutz (2007). The Response of Business Fixed Investment to Energy Price Changes: A Test of Some Hypotheses About the Transmission of Energy Price Shocks. Contributions to Macroeconomics, 7 (February): 1607-1607. DOI: 10.2202/1935-1690.1607
  21. Edison, H. J. (2003). Testing the Links. Finance & Development, 0040(002). DOI: 10.5089/9781451952926.022.A011
  22. Forni, L., Gerali, A., Notarpietro, A., Pisani, M. (2015). Euro Area, Oil and Global Shocks: An Empirical Model-Based Analysis. Journal of Macroeconomics, 46 (December): 295-314.
  23. Golub, S. S. (1983). Oil Prices and Exchange Rates. The Economic Journal, 93(371): 576-93. DOI: 10.2307/2232396
  24. Hamilton, J. (1988). A Neoclassical Model of Unemployment and the Business Cycle. Jour- nal of Political Economy, no. 96: 593-617.
  25. Hamilton, J. (1996). This Is What Happened to the Oil Price-Macroeconomy Relationship. Journal of Monetary Economics, 38: 215-20.
  26. Hamilton, J. (2003). What Is an Oil Shock? Journal of Econometrics, 13: 363-98. DOI: 10.1016/S0304-4076(02)00207-5
  27. Hamilton, J. (2009). Causes and Consequences of the Oil Shock of 2007-08. Brookings Pa- pers on Economic Activity, 1: 215-61.
  28. Hamilton, J., Herrera, A. (2004). A.: Comment: Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy. Journal of Money, Credit and Banking, 36(2): 265-86.
  29. Harkness, J. (1982). Intermediate Imports, Expectations and Stochastic Equilibrium under Flexible Exchange Rates. The Canadian Journal of Economics / Revue Canadienne d’Economique, 15(1): 118-43. DOI: 10.2307/134674
  30. Hooker, M.A. (1996). What Happened to the Oil Price-Macroeconomy Relationship? Journal of Monetary Economics, 38(2): 195-213. DOI: 10.1016/S0304-3932(96)01281-0
  31. IMF (2017). Perspectives de l’économie mondiale, octobre 2016: Demande modérée : symp- tômes et remèdes. Perspectives de l’économie mondiale, octobre 2016. International Mon- etary Fund. -- fr/23490-9781475550801-fr-book.xml.
  32. International Monetary Fund (2021). World Economic Outlook: Recovery during a Pandemic – Health Concerns, Supply Disruptions, Price Pressures. Washington, DC October.
  33. International Monetary Fund (IMF) (2000). The Impact of Higher Oil Prices on the Global Economy. Research Department. Washington, DC. -- pubs/ft/oil/2000/oilrep.PDF.
  34. Jbir, R., Zouari-Ghorbel, S. (2011). Oil Price and Dutch Disease: The Case of Algeria. Energy Sources, Part B: Economics, Planning, and Policy, 6(3): 280-93. DOI: 10.1080/15567240802653993
  35. Jiménez-Rodríguez, R., Sánchez, M. (2005). Oil Price Shocks and Real GDP Growth: Empir- ical Evidence for Some OECD Countries. Applied Economics, 37(2): 201-28. DOI: 10.1080/0003684042000281561
  36. Kilian, L. (2008). Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy? Review of Economics and Statistics, 90: 216-40.
  37. Kilian, L. (2009). Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market. The American Economic Review, 99(3): 1053-69.
  38. Klovland, J.T. (2002). Business Cycles, Commodity Prices and Shipping Freight Rates : Some Evidence from the Pre-WWI Period. Undefined. -- paper/Business-cycles%2C-commodity-prices-and-shipping-%3A-Klovland/6b6465f13 80a0d10894fd4678cffd0f5f971f9bb.
  39. Lardic, S., Mignon, V. (2008). Oil Prices and Economic Activity: An Asymmetric Cointegra- tion Approach. Energy Economics, 30(3): 847-55.
  40. Lee, K., Ni, S., Ratti, R. A. (1995). Oil Shocks and the Macroeconomy: The Role of Price Variability. The Energy Journal, 16(4): 39-56.
  41. Lescaroux, F., Mignon, V. (2008a). On the Influence of Oil Prices on Economic Activity and Other Macroeconomic and Financial Variables*. OPEC Energy Review, 32(4): 343-80.
  42. Lescaroux, F., Mignon, V. (2008b). On the Influence of Oil Prices on Economic Activity and Other Macroeconomic and Financial Variables. OPEC Energy Review, 32(4): 343-80.
  43. Morisset, J. (2000). Foreign Direct Investment in Africa : Policies Also Matter, November. DOI: 10.1596/1813-9450-2481
  44. Mork, Knut A. (1989). Oil and the Macroeconomy When Prices Go Up and Down: An Ex- tension of Hamilton’s Results. Journal of Political Economy, 97(3): 740-44.
  45. Mork, Knut A. (1994). Business Cycles and the Oil Market. Energy Jounal, 15: 15-38. Mork, Knut A., Øystein, O., Mysen, H. T. (1994). Macroeconomic Responses to Oil Price
  46. Increases and Decreases in Seven OECD Countries. The Energy Journal, 15(4): 19-35. Perron, P., Vogelsang, T. J. (1992). Testing for a Unit Root in a Time Series with a Changing
  47. Mean: Corrections and Extensions. Journal of Business & Economic Statistics, 10(4): 467-70. DOI: 10.2307/1391823
  48. Rajhi, T., Benabdellah, M., Hmissi, W. (2005). Impact Des Chocs Pétroliers Sur Les Écono- mies Africaines : Une Enquête Empirique. Houston.
  49. Stopford, M. (2008). Maritime Economics 3e. 3rd ed. London: Routledge.

Kamel Malik Bensafta, The impact of oil price shocks on economic growth in Algeria in "ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT" 2/2022, pp 63-82, DOI: 10.3280/EFE2022-002004