Oil Price Shocks and Their Effects on Mozambican Economy

Abstract

In this paper, the oil price shocks and their effects on Mozambican economy is empirically analyzed for the time span covered by 1996:Q1-2012:Q4. The VAR methodology was used and the variables were Real Gross Domestic Product, Wages and Consumer Price Index. The results of the estimations, show a depressive impact on gross domestic product, increase in general the price level and the impact of an oil shock on wages is small and positive, in contradiction to conventional theory. In general, the wages decreases by an average of 1.5 percentage points. The key policy response to the impact of high oil prices is the extent to which governments have passed on the price increases to consumers, or have moderated them with subsidies, tax reductions, or pressure on oil companies to hold down price.

Keywords: Oil prices, Mozambique, Vector Auto Regression.

DOI: 10.7176/JESD/11-4-11

Publication date: February 29^th 2020