The Dynamic Impact of Oil Price on Economic Growth in African Countries

This study examines the influence of oil prices on economic growth across 51 African countries from 2005 to 2023. It uses pooled Ordinary Least Squares (OLS), Random Effects (RE), Fixed Effects (FE), and the Generalized Method of Moments (GMM) estimations to address issues of endogeneity and dynamic relationships. The analysis includes key macroeconomic variables such as the labor force, capital, exchange rates, inflation, and the current account balance. Results from dynamic panel GMM models show sustained economic growth, indicated by a strong, positive lagged GDP coefficient. Oil prices have a statistically significant positive effect on growth in the RE, FE, and GMM models, highlighting the influence of oil market fluctuations on African economies. Variables like labor force and capital investment support growth, while inflation and exchange rate volatility negatively affect it, reflecting macroeconomic risks. Additionally, the impact of oil prices on economic growth is asymmetric between oil-importing and oil-exporting countries, indicating the vulnerability of African economies to oil price fluctuations. These findings emphasize the crucial role of oil price movements in shaping the economic landscape of African nations and underscore the need for comprehensive macroeconomic policies to manage inflation and exchange rate pressures.