Analyzing the Effect of Oil Price Fluctuation on East Africa’s Foreign Exchange Ratevolatility
Journal Title: Journal of Economics, Finance and Management Studies - Year 2024, Vol 7, Issue 01
Abstract
Oil is one of the major sources of energy in the world today, therefore many sectors of the economy are directly or indirectly dependent on oil as a source of energy. These has made oil price fluctuation to one of the most sort after macroeconomic variable due to its potential effects on the global economy. The primary objective of this paper was to investigate the effects of oil price shocks on foreign exchange rate of the three East African countries using SVAR analysis for the period from 1990 to 2022. Our empirical evidence confirmed that the increase in the price of crude oil in leads to a positive change in foreign exchange to the Dollar, the SVAR estimation confirmed positive significant effect of oil price fluctuation on foreign exchange trends, the results of the IRF pointed out oil price fluctuation positively affect the East Africa’s foreign exchange performance and finally the FEVD of oil price fluctuation on foreign exchange reflected that there exist indirect effects of oil price fluctuation on foreign exchange as well as foreign exchange influencing oil price after the second period. Based on these findings we therefore conclude that crude oil price fluctuations contribute significantly to the foreign exchange variability in the East African countries and hence affecting other sectors of the economy inversely.It is on this ground that we recommend adoption of policies that will reduce this effect on this countries, to start with to reduce the burden the countries should look for alternative locally available source of power that include adoption of Bi-diesel, compressed methane that can be source from sugar cane give the un tapped potential of sugar can in the three countries. In addition, the countries can consider price hedging of oil purchases where the countries enter into contract with their oil supplies for a constant crude oil price over the contract period.
Authors and Affiliations
Kotut CheruiyotSamel, Prof. Chepkwony Joel, Dr Saina Ernest.
Keywords
Related Articles
- EP ID EP730281
- DOI 10.47191/jefms/v7-i1-78
- Views 38
- Downloads 0
Personal Financial Management Training for Indonesian Migrant Workers in Hongkong
Hong Kong became the country most frequently chosen by Indonesian Migrant Workers (IMW) in 2021. The reasons that motivate IMWs to work in Hong Kong are the relatively high wages offered and the atmosphere of freedom. Ho...
Inflationary Effects, Exchange Rate and Economic Growth Rate in Kenya
Human civilization has always been centred on economic growth. Economic growth difficulties are the main focus of government policy and study in the modern, globalized world. Kenya's overarching goal is to become a middl...
Analysis of the Effect of Debt to Equity Ratio, Current Ratio and Company Size on Return on Assets Moderated Net Profit Margin (Case Study on Pharmaceutical Company Go Public on IDX in 2015 - 2021)
: The study focusing to examine how the Debt to Equity Ratio, Current Ratio, Company Size influence the Return on Assets ratio with Net Profit Margin as a moderating variable. This study has pharmaceutical companies list...
The Influence of Work Empowerment and Motivation on Increasing Work Productivity Employees (Study on Pt. Bank Bengkulu)
This study aims to examine the effect of work empowerment and motivation on increasing employee productivity. The sampling technique in this study used purposive sampling with the criteria of employees who have worked fo...
Impact of Religiosity on Purchase of Beauty Products in Pakistan
Religion is an integral component of Pakistani culture with a growing impact that cannot be belittled by advertisers. The purpose of this study is to understand the dominant purchase element and its impact over customer...