Trade Balance and Oil Shocks in African Oil Exporting Countries: A Panel Threshold Regression

Nenubari Ikue, Lamin Mohammed Magaji, Samuel Zeb-Omoni, Aminu Usman Mohammed and Joseph Osaro Denwi
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Lamin Mohammed Magaji: Central Bank of Nigeria
Samuel Zeb-Omoni: Central Bank of Nigeria
Aminu Usman Mohammed: Central Bank of Nigeria
Joseph Osaro Denwi: University of Port Harcourt

International Journal of Finance & Banking Studies, 2021, vol. 10, issue 4, 150-166

Abstract: This paper is driven by the vast influence oil money have on the current account balance of major oil producing countries in Africa and the role policy measures could play to soften these effects. Dwelling on the nonlinear techniques, two types of Threshold Regression were used to estimate data on 8 African countries from 1995-2019. The results show evidence of nonlinear impacts of oil revenue on the current account balances of the 8 countries. The nature of the impact relies significantly on the levels of the threshold variable. Precisely, the estimated threshold benchmark for financial development was 33.34; below this threshold the sensitivity of current account balance to crude-oil shocks is higher and the probability of policy measures to mitigate the effects is low and, beyond the threshold the sensitivity of current account balance to crude-oil shocks is low and the probability of policy measure to mitigate the effects is higher. The finding suggested among others that crude-oil shocks is not the primary problem of the current account imbalance of oil-exporting countries rather the nature of the domestic economic policy environment.

Keywords: Threshold; Financial-Deepening; Oil-Revenue; Current-Account-Balance; Rig-Count (search for similar items in EconPapers)
Date: 2021
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