IDEAS home Printed from https://ideas.repec.org/a/spr/fininn/v10y2024i1d10.1186_s40854-023-00527-w.html
   My bibliography  Save this article

Global shocks and fiscal stimulus: a tale of an oil-dependent-exporting country

Author

Listed:
  • David Iheke Okorie

    (Hangzhou City University (HZCU)
    University of Waikato
    Centre for the Study of the Economies of Africa (CSEA)
    SD Consulting Agency (SCA))

  • Boqiang Lin

    (Xiamen University)

Abstract

Global shocks potentially distort economy’s achieved equilibria. Considering the 2020 global crude oil price shock and the 2019 coronavirus disease pandemic, this study proposes an energy and environment integrated general equilibrium model to analyze the economic, energy, and environmental effects of these global shocks on Nigeria, a developing, oil-producing, oil-dependent, and oil-exporting country. Furthermore, the mitigating roles of a fiscal stimulus–response package (palliative) are investigated and analyzed. Generally, the developed model predicts a decline in the level of economic activities. The study results are unsurprising due to Nigeria’s heavy reliance on crude oil. However, sectorial-specific impacts exist as some sectors experience output declines while others do not. Environmental quality is improved since more carbon is abated, nonetheless. Carbon intensities increased given that the price effects outweighed the quantity effects— reduced emission results from reduced economic activities and not from technological progress. The results further show a revenue-abatement paradox; a fixed carbon tax approach minimizes the tax revenue loss but may discourage carbon abatement. Conversely, the ad valorem and specific carbon tax systems encourage carbon abatement but reduce carbon tax revenues. The government’s fiscal policy stimulus–response (palliative) action dampens the impact of these global shocks on both the domestic agents and the overall economy. The results are robust and can be applied to the experiences of other developing oil-producing, oil-exporting, and oil-dependent economies.

Suggested Citation

  • David Iheke Okorie & Boqiang Lin, 2024. "Global shocks and fiscal stimulus: a tale of an oil-dependent-exporting country," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-37, December.
    • Handle: RePEc:spr:fininn:v:10:y:2024:i:1:d:10.1186_s40854-023-00527-w
    DOI: 10.1186/s40854-023-00527-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s40854-023-00527-w
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1186/s40854-023-00527-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Liu, Jing-Yu & Lin, Shih-Mo & Xia, Yan & Fan, Ying & Wu, Jie, 2015. "A financial CGE model analysis: Oil price shocks and monetary policy responses in China," Economic Modelling, Elsevier, vol. 51(C), pages 534-543.
    2. Harjoto, Maretno Agus & Rossi, Fabrizio & Lee, Robert & Sergi, Bruno S., 2021. "How do equity markets react to COVID-19? Evidence from emerging and developed countries," Journal of Economics and Business, Elsevier, vol. 115(C).
    3. Garzon, Antonio J. & Hierro, Luis A., 2021. "Asymmetries in the transmission of oil price shocks to inflation in the eurozone," Economic Modelling, Elsevier, vol. 105(C).
    4. Agbahey, Johanes & Siddig, Khalid & Grethe, Harald, 2020. "Implications of labor supply specifications in CGE models: A demonstration for employment of Palestinian labor in Israel and its impact on the West Bank economy," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 265-284.
    5. Rempel, Arthur & Gupta, Joyeeta, 2021. "Fossil fuels, stranded assets and COVID-19: Imagining an inclusive & transformative recovery," World Development, Elsevier, vol. 146(C).
    6. Syed Jawad Hussain Shahzad & Elie Bouri & Sang Hoon Kang & Tareq Saeed, 2021. "Regime specific spillover across cryptocurrencies and the role of COVID-19," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-24, December.
    7. Philip K Verleger, 2011. "Rising Crude Oil Prices: The Link to Environmental Regulations," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 46(4), pages 239-248, October.
    8. David Iheke Okorie, 2017. "Testing the Existence of Cobb-Douglas and CES Production Functions in Nigeria," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(3), pages 270-297, March.
    9. Tiwari, Aviral Kumar & Aikins Abakah, Emmanuel Joel & Gabauer, David & Dwumfour, Richard Adjei, 2022. "Dynamic spillover effects among green bond, renewable energy stocks and carbon markets during COVID-19 pandemic: Implications for hedging and investments strategies," Global Finance Journal, Elsevier, vol. 51(C).
    10. Corbet, Shaen & Hou, Yang (Greg) & Hu, Yang & Oxley, Les, 2021. "An analysis of investor behaviour and information flows surrounding the negative WTI oil price futures event," Energy Economics, Elsevier, vol. 104(C).
    11. Ahundjanov, Behzod B. & Akhundjanov, Sherzod B. & Okhunjanov, Botir B., 2021. "Risk perception and oil and gasoline markets under COVID-19," Journal of Economics and Business, Elsevier, vol. 115(C).
    12. David Iheke Okorie, 2019. "The Choice of Wage Rate and Incentive for Labour Productivity Maximization," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 62(2), pages 279-290, June.
    13. Li, Wei & Jia, Zhijie, 2016. "The impact of emission trading scheme and the ratio of free quota: A dynamic recursive CGE model in China," Applied Energy, Elsevier, vol. 174(C), pages 1-14.
    14. F J André & M A Cardenete & C Romero, 2008. "Using compromise programming for macroeconomic policy making in a general equilibrium framework: theory and application to the Spanish economy," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(7), pages 875-883, July.
    15. Rania Jammazi & Duc Khuong Nguyen, 2017. "Estimating and forecasting portfolio’s Value-at-Risk with wavelet-based extreme value theory: Evidence from crude oil prices and US exchange rates," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(11), pages 1352-1362, November.
    16. Ma, Richie Ruchuan & Xiong, Tao & Bao, Yukun, 2021. "The Russia-Saudi Arabia oil price war during the COVID-19 pandemic," Energy Economics, Elsevier, vol. 102(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liu, Xianglong Locky & Nassios, Jason & Giesecke, James, 2024. "To tax or to spend? Modelling tax policy responses to oil price shocks," Energy Policy, Elsevier, vol. 185(C).
    2. Paresh Kumar Narayan & Syed Aun R. Rizvi & Ali Sakti, 2022. "Did green debt instruments aid diversification during the COVID-19 pandemic?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-15, December.
    3. Conlon, Thomas & Corbet, Shaen & Goodell, John W. & Hou, Yang (Greg) & Oxley, Les, 2024. "Financial market information flows when counteracting rogue states: The indirect effects of targeted sanction packages," Journal of Economic Behavior & Organization, Elsevier, vol. 217(C), pages 32-62.
    4. Mukashov, A., 2023. "Parameter uncertainty in policy planning models: Using portfolio management methods to choose optimal policies under world market volatility," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 187-202.
    5. Jing Deng & Jingxuan Lu & Yujie Zheng & Xiaoyun Xing & Cheng Liu & Tao Qin, 2022. "The Impact of the COVID-19 Pandemic on the Connectedness between Green Industries and Financial Markets in China: Evidence from Time-Frequency Domain with Portfolio Implications," Sustainability, MDPI, vol. 14(20), pages 1-24, October.
    6. Xu, Danyang & Hu, Yang & Corbet, Shaen & Hou, Yang (Greg) & Oxley, Les, 2024. "Green bonds and traditional and emerging investments: Understanding connectedness during crises," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).
    7. Li, Houjian & Huang, Xinya & Guo, Lili, 2023. "Extreme risk dependence and time-varying spillover between crude oil, commodity market and inflation in China," Energy Economics, Elsevier, vol. 127(PB).
    8. Wei, Yu & Wang, Yizhi & Vigne, Samuel A. & Ma, Zhenyu, 2023. "Alarming contagion effects: The dangerous ripple effect of extreme price spillovers across crude oil, carbon emission allowance, and agriculture futures markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    9. Agbahey, Johanes & Siddig, Khalid & Grethe, Harald, 2021. "Economy-wide effects of cross-border labor mobility: The case of Palestinian employment in Israel," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 964-981.
    10. Ra l De Jes s Guti rrez & Lidia E. Carvajal Guti rrez & Oswaldo Garcia Salgado, 2023. "Value at Risk and Expected Shortfall Estimation for Mexico s Isthmus Crude Oil Using Long-Memory GARCH-EVT Combined Approaches," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 467-480, July.
    11. Ashok, Shruti & Corbet, Shaen & Dhingra, Deepika & Goodell, John W. & Kumar, Satish & Yadav, Miklesh Prasad, 2022. "Are energy markets informationally smarter than equity markets? Evidence from the COVID-19 experience," Finance Research Letters, Elsevier, vol. 47(PB).
    12. Julien Lefevre, 2018. "Modeling the Socioeconomic Impacts of the Adoption of a Carbon Pricing Instrument – Literature review," CIRED Working Papers hal-03128619, HAL.
    13. Sohag, Kazi & Sokhanvar, Amin & Belyaeva, Zhanna & Mirnezami, Seyed Reza, 2022. "Hydrocarbon prices shocks, fiscal stability and consolidation: Evidence from Russian Federation," Resources Policy, Elsevier, vol. 76(C).
    14. Tan, Xiujie & Sun, Qian & Wang, Meiji & Se Cheong, Tsun & Yan Shum, Wai & Huang, Jinpeng, 2022. "Assessing the effects of emissions trading systems on energy consumption and energy mix," Applied Energy, Elsevier, vol. 310(C).
    15. Mehmet Balcilar & Rangan Gupta & Christian Pierdzioch, 2022. "Oil-Price Uncertainty and International Stock Returns: Dissecting Quantile-Based Predictability and Spillover Effects Using More than a Century of Data," Energies, MDPI, vol. 15(22), pages 1-26, November.
    16. Tiwari, Aviral Kumar & Aikins Abakah, Emmanuel Joel & Adekoya, Oluwasegun B. & Hammoudeh, Shawkat, 2023. "What do we know about the price spillover between green bonds and Islamic stocks and stock market indices?," Global Finance Journal, Elsevier, vol. 55(C).
    17. Arfaoui, Nadia & Naeem, Muhammad Abubakr & Boubaker, Sabri & Mirza, Nawazish & Karim, Sitara, 2023. "Interdependence of clean energy and green markets with cryptocurrencies," Energy Economics, Elsevier, vol. 120(C).
    18. Chen, Yu-Fen & Lin, Fu-Lai & Yeh, Wen-Hung, 2024. "Intra- and inter-sector spillover effects within a supply chain: Evidence from Taiwan electric motorcycle industry," Economics Letters, Elsevier, vol. 240(C).
    19. Clement Moyo & Izunna Anyikwa & Andrew Phiri, 2023. "The Impact of Covid-19 on Oil Market Returns: Has Market Efficiency Being Violated?," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 118-127, January.
    20. Billah, Mabruk & Alam, Md Rafayet & Hoque, Mohammad Enamul, 2024. "Global uncertainty and the spillover of tail risk between green and Islamic markets: A time-frequency domain approach with portfolio implications," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1416-1433.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:fininn:v:10:y:2024:i:1:d:10.1186_s40854-023-00527-w. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.