Macroeconomic Effect of Commodity Price Shocks
Moses K. Tule, Adegoke I Adeleke, Udoma J. Afangideh and Austin Ujunwa
Abstract
The current global commodity price shocks have affected many commodity dependent countries and also raised serious concerns on the viability of regional blocks whose member countries are predominantly commodity-based economies. ECOWAS sub-region typifies evidence of primary export as the main source of income and foreign exchange, thereby making them susceptible to commodity price shocks. This paper, therefore, examines the effect of commodity price shocks on 13 ECOWAS member countries using both static and dynamic panel data analysis for the period 2000 – 2015. The results clearly show that there is a positive and statistically significant relationship between commodity prices (energy and precious metals) and per capita income in the sub-region. However, a negative relationship was observed between non-energy prices and per capita income. The implication of the result is that declining commodity prices (energy and precious metals) has the tendency of deteriorating per capita income and thus the standard of living of the populace in the ECOWAS sub-region. This result reinforces the need to rethink the issues of regional integration agenda not only along monetary lines, but also along diversification integration.
Key Word: Energy Prices, Panel Analysis, ECOWAS
JEL Classification: Q43, O13 and C23