The Effects of Oil Price Uncertainty on Economic Activities in South Africa

Junior Chiweza () and Goodness Aye ()
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Junior Chiweza: Department of Economics, University of Pretoria, South Africa
Goodness Aye: Department of Economics, University of Pretoria, Pretoria, South Africa

No 201724, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper investigates the link between oil price uncertainty shocks and key macroeconomic indicators of a net oil importing country, South Africa. Monthly data covering the period 1990:01 to 2015:12 is used. The Structural Vector Auto-regressive (SVAR) methodology is applied incorporating realized volatility as an indicator of oil price uncertainty to investigate the short run effects of oil price uncertainty. The Generalised Impulse Response Functions (GIRF) analysis reveals that for most variables, the impact of the oil price uncertainty shock is significant and persistent over time. Consistent with GIRF, the Generalised Forecast Error Variance Decompositions (GFEVDs) analysis also points out that oil price uncertainty shocks contributes substantially to variations in real output and various macroeconomic variables of South Africa. Therefore, SVAR analysis reveals the significant role of exogenous oil prices on the economy of South Africa when price uncertainty shocks exist.

Keywords: Oil price uncertainty; volatility; economic activities; short run; SVAR; South Africa (search for similar items in EconPapers)
JEL-codes: C32 E32 Q43 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2017-03
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201724

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