The Effects of Uncertainty on Inflation and Output Growth in Four African Oil-Rich Countries: Evidence from an Asymmetric Multivariate GARCH-M Model

摘要

This study examines the impact of uncertainty on the levels of inflation and output growth for four African oil-rich countries, namely Algeria, Congo Republic, Gabon and Libya using an asymmetric multivariate GARCH-M model initiated by [21]. A number of important findings arise from this study. First, considering the impact of inflation uncertainty on inflation, Cukierman-Meltzer hypothesis is supported for Algeria and Gabon, while the stabilization hypothesis of [24] is supported for Congo Republic and Libya.Second, on the impact of output growth uncertainty on inflation, our findings support Devereux’ hypothesis of a positive impact of output growth uncertainty on the level of inflation for Congo Republic and a negative impact of output growth uncertainty on the level of inflation for the rest of the countries. Third, a closer look at the impact of inflation uncertainty on output growth shows that Friedman’s hypothesis of a negative impact of inflation uncertainty on output growth could not be supported for any country. In contrast, the hypothesis of a positive impact of inflation uncertainty on output growth suggested by [10] is supported for all the countries under study. Finally, concerning the impact of output growth uncertainty on output growth, Black hypothesis of a positive impact of output growth uncertainty on output growth is supported for Algeria, Gabon and Libya, while the views of [37] and [38] of a negative impact of output growth uncertainty on output growth are supported for Congo Republic. This is to the best of my knowledge the first attempt to examine the impact of uncertainty on inflation and output growth for these four African countries, namely Algeria, Congo Republic, Gabon and Libya. Further empirical investigations are therefore needed to shed more light on this issue.