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Oil Price Uncertainty and Savings in South Africa

Diksha Dave () and Goodness Aye ()
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Diksha Dave: Department of Economics, University of Pretoria
Goodness Aye: Department of Economics, University of Pretoria

No 201485, Working Papers from University of Pretoria, Department of Economics

Abstract: Oil prices have become increasingly important to determine indicators such as inflation; this in turn affects savings and investments. This paper investigates the impact of the volatility of oil prices on savings in South Africa using quarterly data covering the period 1960 to 2014. The study used the GARCH-in-mean VAR model. This model also provides a way of examining the effect of a negative and positive shock in oil prices on savings. The outcome of this study proves that oil price uncertainty which is measured as the conditional standard deviation of a one-step-ahead forecast error of the change in oil price affects South Africa’s savings in a negative way. The responses of savings to a positive and negative oil price shocks is symmetric in both direction and magnitude.

Keywords: Oil price uncertainty; savings; Asymmetry; GARCH-in-mean VAR (search for similar items in EconPapers)
JEL-codes: C32 E21 Q41 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2014-12
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