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Asymmetric effects of oil price changes on the balance of trade: Evidence from selected African countries

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  • Jungho Baek
  • Kyoung Doug Kwon

Abstract

The main new contribution of this study was to delve into the asymmetric impacts of changes in oil prices on the trade balance in the framework of six major African economies. To tackle this topic carefully, we employ three measures of external balances—oil, non‐oil and total trade balances, and assess the asymmetric response of the external balances of those six economies to oil price changes in the short and long run. Like most previous studies, we first assume the impacts of oil price fluctuations to be symmetric and employ the linear autoregressive distributed lag (ARDL) method to explore the topic. We then separate oil price hikes from oil price plunges and implement the non‐linear ARDL method to reveal that the price of crude oil has a vital role to play in the trade balances for those six African economies. Further, there is evidence of significant asymmetric impacts of oil prices typically on the oil trade balance of Africa's top oil producing countries. For the non‐oil and total trade balances, in contrast, there is little evidence of the asymmetry of oil price changes.

Suggested Citation

  • Jungho Baek & Kyoung Doug Kwon, 2019. "Asymmetric effects of oil price changes on the balance of trade: Evidence from selected African countries," The World Economy, Wiley Blackwell, vol. 42(11), pages 3235-3252, November.
    • Handle: RePEc:bla:worlde:v:42:y:2019:i:11:p:3235-3252
    DOI: 10.1111/twec.12844
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    Cited by:

    1. Baek, Jungho & Yoon, Jee Hee, 2022. "Do macroeconomic activities respond differently to oil price shocks? New evidence from Indonesia," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 852-862.
    2. Tarek Tawfik Yousef Alkhateeb & Haider Mahmood, 2020. "The Oil Price and Trade Nexus in the Gulf Co-Operation Council Countries," Resources, MDPI, vol. 9(12), pages 1-19, November.
    3. Balli, Esra & Nazif Çatık, Abdurrahman & Nugent, Jeffrey B., 2021. "Time-varying impact of oil shocks on trade balances: Evidence using the TVP-VAR model," Energy, Elsevier, vol. 217(C).
    4. Liurong Pan & Asad Amin & Nian Zhu & Abbas Ali Chandio & Eric Yaw Naminse & Aadil Hameed Shah, 2022. "Exploring the Asymmetrical Influence of Economic Growth, Oil Price, Consumer Price Index and Industrial Production on the Trade Deficit in China," Sustainability, MDPI, vol. 14(23), pages 1-22, November.
    5. Baek, Jungho, 2023. "A new look at the crude oil shocks and trade nexus: Evidence from bilateral trade between Korea and its three largest partners," Resources Policy, Elsevier, vol. 85(PA).
    6. Vatsa, Puneet & Baek, Jungho, 2024. "Asymmetric effects of oil demand and oil supply shocks on New Zealand's trade," Resources Policy, Elsevier, vol. 92(C).
    7. Jungho Baek, 2024. "Does Crude Oil Production Respond Differently to Oil Supply and Demand Shocks? Evidence from Alaska," Commodities, MDPI, vol. 3(1), pages 1-13, February.
    8. Jungho Baek, 2023. "Oil Prices, World Trade Policy Uncertainty, and the Trade Balance: The Case of Korea," Commodities, MDPI, vol. 2(3), pages 1-13, June.
    9. Jungho Baek, 2022. "Not all oil shocks on the trade balance are alike: Empirical evidence from South Korea," Australian Economic Papers, Wiley Blackwell, vol. 61(2), pages 291-303, June.

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