scholarly journals Direct vs. Indirect Impact of Fuel Price on Wages in South Africa

2020 ◽  
Vol 24 ◽  
Author(s):  
Temitope Lydia Leshoro ◽  
Glenda Maluleke
Keyword(s):  
South Africa ◽  
Direct Effect ◽  
Inflation Rate ◽  
Impulse Response Function ◽  
Oil Prices ◽  
Fuel Price ◽  
Vector Autoregressive ◽  
Fuel Prices ◽  
Domestic Prices ◽  
Pass Through

The international oil price has been increasing significantly, but consumers react more to the announcement of the increase in fuel (pump) price, than an increase in international oil prices. This study, therefore, investigates the direct effect of fuel prices on the inflation rate and wages in South Africa, on the one hand, and the domestic price pass-through from fuel prices to wages (indirect effect) on the other. The impulse-response function of the vector autoregressive (VAR) technique was used to examine the direct and indirect effects of fuel prices on the inflation rate and wages, as well as the domestic prices pass-through from fuel prices to wages in South Africa. Quarterly data from 2001Q1 to 2018Q2 were utilised. The empirical results showed that inflation and wages responded positively to the shock in the fuel price. The results indicated that although wages increased because of a shock in the inflation rate—depicting the pass-through from the fuel price—the direct impact of the fuel price on wages is more significant. This study departs from the usual studies that examine the exchange rate pass-through of international oil prices to the inflation rate. The conclusion drawn was that the pass-through effect was not as strong and did not contribute as much as the direct effect of the fuel price. Therefore, the indirect shock of fuel prices, via inflation, does not so much cause an increase in wages as its direct shock. The study concludes with policy recommendations.

scholarly journals To Pass (or Not to Pass) Through International Fuel Price Changes to Domestic Fuel Prices in Developing Countries

2020 ◽  
Vol 20 (194) ◽  
Author(s):  
Kangni Kpodar ◽  
Patrick Imam
Keyword(s):  
Developing Countries ◽  
Short Term ◽  
Fuel Price ◽  
Price Changes ◽  
Fuel Prices ◽  
International Prices ◽  
Domestic Prices ◽  
Pass Through ◽  
Political Variables ◽  
Domestic Fuel

While many developing countries limit the international fuel price pass through to domestic fuel prices, others do not. Against this backdrop, we examine the factors that determine whether governments allow international fuel price changes to be passed through to domestic prices in developing countries using a dataset spanning 109 developing countries from 2000 to 2014. The paper finds that the pass-through is higher when changes in international prices are moderate and less volatile. In addition, the flexibility of the pricing mechanism allows for higher pass-through while exchange rate depreciation and lower retail fuel prices in neighboring countries inhibit it. The econometric results also underscore the fact that countries with inflation tend to experience lower pass-through, whereas those with high public debt exhibit larger pass-through. Finally, no evidence is found that political variables or environmental policies matter with regard to fuel price dynamics in the short-term. These findings, which are consistent across fuel products (gasoline, diesel and kerosene), allow us to draw important policy lessons for fuel subsidy reforms.

scholarly journals Food and Fuel Prices-Recent Developments, Macroeconomic Impact, and Policy Responses—An Update

Policy Papers ◽  
2008 ◽  
Vol 2008 (58) ◽  
Author(s):  
Keyword(s):  
Oil Prices ◽  
Early Summer ◽  
Balance Of Payments ◽  
Fuel Price ◽  
Middle Income ◽  
Fuel Prices ◽  
Domestic Prices ◽  
Recent Developments ◽  
Macroeconomic Impact ◽  
The Impact

This report updates the macroeconomic assessment of the impact of global food and fuel price increases provided in the IMF June 2008 Board paper: Food and Fuel Prices—Recent Developments, Macroeconomic Impact, and Policy Response. Food and oil prices peaked in early summer—in particular, oil prices surged to levels envisaged under the most adverse scenario presented in the June paper. Against this background, the effects of higher prices on the balance of payments, budgets, and domestic prices intensified and a large group of low- and middle-income countries is experiencing a substantial weakening of their balance of payments and higher inflation. These findings reinforce the importance of adopting appropriate policies to maintain macroeconomic stability while protecting the poor.

scholarly journals PENGARUH HARGA MINYAK DUNIA TERHADAP PERTUMBUHAN EKONOMI, INFLASI, DAN PENGANGGURAN DI INDONESIA

2020 ◽  
Vol 7 (1) ◽  
pp. 13-24
Author(s):  
Sodik Dwi Purnomo ◽  
Istiqomah Istiqomah ◽  
Lilis Siti Badriah
Keyword(s):  
Economic Growth ◽  
Data Analysis ◽  
Standard Deviation ◽  
Inflation Rate ◽  
Vector Autoregression ◽  
Oil Prices ◽  
Positive Influence ◽  
Oil Price ◽  
Vector Autoregressive ◽  
Analysis Technique

The purpose of this research is to analyze the influence of oil prices fluctuations to Indonesia macroeconomics that is economic growth, inflation, and unemployment from 1988 to 2018. The data analysis technique uses Vector Autoregressive (VAR). The result showed that oil price fluctuations in the amount of one standard deviation will gives a positive influence to economic growth, inflation rate, and unemployment which each has 0,001 percent, 0,001 percent, and 0,002 percent.Keyword : World Oil Prices, Economic Growth, Inflation, and Unemployment Abstrak Tujuan dari penelitian ini adalah untuk mengetahui bagaimana pengaruh fluktuasi harga minyak dunia terhadap variabel makroekonomi Indonesia yaitu pertumbuhan ekonomi, inflasi, dan angka pengangguran dari tahun 1988 sampai dengan 2018. Teknik analisis data menggunaan Vector Autoregression (VAR). Hasil analisis menunjukkan bahwa guncangan yang terjadi pada fluktuasi harga minyak dunia sebesar satu standar deviasi akan memberikan pengaruh positif terhadap pertumbuhan ekonomi, inflasi serta pengangguran yaitu masing-masing sebesar 0,001 persen, 0,001 persen, dan 0,002 persen.Kata Kunci : Harga Minyak Dunia, Pertumbuhan Ekonomi, Inflasi, dan Pengangguran

scholarly journals Effect Of Oil Prices On Food prices: Time Series Analysis Using Vector Autoregressive (VAR) Model

2020 ◽  
Author(s):  
Sassi Mohamed Taher
Keyword(s):  
Impulse Response ◽  
Impulse Response Function ◽  
Commodity Prices ◽  
Oil Prices ◽  
Food Prices ◽  
Estimation Methods ◽  
Short Term ◽  
Causality Test ◽  
Vector Autoregressive ◽  
Rice Prices

This study examines the effect of oil prices on food prices using worldwide monthly data covering crude oil prices wheat, soybeans and rice prices from 08.2013 until 06.2017 from World-Bank-Database 2017. It specifically considers the identification of the short-term causal relationship between oil and the selected commodity prices using the Vector-Autoregressive-Model as main model and its post-estimation methods, Granger-Causality-Test and Impulse response function. The results show that there is no long run relationship between the variables but a significant causal short-term relationship between oil prices and wheat prices is confirmed. The impulse response results after a simulated shock on oil prices showed mainly negative response of soybeans prices a and persistent increase on wheat prices, for the rice prices response there was a slight increase on rice prices after the shock of oil prices. This research targets the detection of one influencing factor to food prices in order to support food security. To achieve this objective and recommend solutions research needed to further investigate the interaction of food prices with other variables.

scholarly journals The Effects of Foreign Resource Inflow and Savings on the Economic Growth of South Africa: A VAR Analysis

2014 ◽  
Vol 6 (3) ◽  
pp. 232-241
Author(s):  
Temitope L. A.
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
South African ◽  
Impulse Response Function ◽  
Vector Autoregressive ◽  
Var Analysis ◽  
Long Run ◽  
Domestic Savings ◽  
Low Levels ◽  
Using Data

This study adopts both the Vector Autoregressive (VAR) analysis and the Impulse-Response Function (IRF) to examine the importance and the effects of domestic savings and foreign direct investment (FDI) on South African economy, using data spanning over the period 1975 to 2011. While the level of domestic savings is quite low, compared to other emerging economies, South Africa has also been struggling to attract inflow of foreign resources. The form of savings in South Africa is different from the western way of savings; hence the low levels of domestic savings. The variables considered were tested for stationarity and they were all stationary before proceeding to test for cointegration and then estimate and VAR. The cointegration test revealed that there was at least one cointegrating equation; which signifies that there exists a long-run relationship among the variables. The results from the VAR Granger test of causality depicted that domestic savings lead economic growth, while economic growth leads investment. This result of the IRF also showed that while increased domestic savings is important to improve the level of economic growth in South Africa, it also leads FDI. This means that the economic environment needs to be suitable in order to attract foreign investments. The results obtained are reliable and stable as the model passes a battery of diagnostic tests. The study proposes some recommendations for policy.

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