Commodities Shocks and Macroeconomic Fluctuations in Africa: Does Resource Status Matter?

Abstract

Sub-Saharan African (SSA) economies have faced cyclical and macroeconomic challenges, marked by volatile growth, high inflation, and unstable exchange rates, mainly driven by commodity price fluctuations. Regrettably, many studies have overlooked the crucial role of structural characteristics, such as resource status, in shaping macroeconomic responses to commodity price shocks in the region. To bridge this gap, this study employed the bootstrap Granger causality test, and the panel structural vector autoregressive (PSVAR) test to establish the long-term relationship between commodities and macroeconomic variables, while also exploring the distinct spillover effects of commodity price shocks based on resource status in SSA. The findings reveal that oil-rich and non-resource countries experience more profound impacts of commodity price shocks on growth, inflation, and exchange fluctuations. These findings emphasise the critical influence of resource status on macroeconomic responses to commodity price shocks in Sub-Saharan Africa. By highlighting the differing impacts of commodity price shocks based on the resource status of SSA countries, this study underscores the importance of considering country-specific factors in designing effective policy responses to mitigate the effects of commodity price fluctuations in the region. Policymakers should consider these findings to foster economic stability and resilience in SSA economies amid commodity market volatility.

Keywords

• macroeconomic fluctuations
• oil-rich
• other-resource rich and non-resources
• developing economies; commodity price shocks; sub-saharan africa