Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/237422
Year of Publication: 
2020
Citation: 
[Journal:] CBN Journal of Applied Statistics [ISSN:] 2476-8472 [Volume:] 11 [Issue:] 1 [Publisher:] The Central Bank of Nigeria [Place:] Abuja [Year:] 2020 [Pages:] 1-34
Publisher: 
The Central Bank of Nigeria, Abuja
Abstract: 
The global oil dynamics has significant implications for both oil exporting and importing small open economies. However, much of the literature on oil shocks is oriented towards advanced oil-importing economies. Micro-founded studies that explore the effects of oil shocks from the standpoint of oil-endowed emerging economies are rather sparse, compared to the preponderance of studies on developed oil importers and exporters. Thus, resulting to a consequential knowledge gap on oil price transmission mechanism and a limited appreciation of the growing policy dilemmas in these economies. The paper, therefore, sets up a new Keynesian dynamic stochastic general equilibrium (DSGE) model to study how an oil price shock impact macroeconomic aggregates in an oil-rich emerging economy. We consider a positive oil price shock to uncover the extent to which oil price increase is positive for the economy. The typical small open economy model is enriched with an export-oriented oil firm, a multi-sector foreign production and a non-oil domestic firm. The model is closed with exchange rate-augmented interest rate rule, and it is calibrated forNigeria, an important oil producer. Macroeconomic responses, sequel to a simulated positive oil price shock, reveal evidence of Dutch disease and the operation of the Harrod-Balassa-Samuelson effect. We find a compelling need for oil-endowed emerging economies to address these phenomena by ensuring a robust non-oil sector with limited exposure to the vagaries of oil price oscillation.
Subjects: 
DSGE Model
Emerging Oil Exporter
Macroeconomic Dynamics
Oil Price
JEL: 
E32
F41
F47
Q41
Persistent Identifier of the first edition: 
Document Type: 
Article

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