The US–China trade dispute: spill-over effects for selected oil-exporting countries in Africa using GVAR analysis

Abstract

This article forecasts possible effects of the trade war between the two economic powers, United States (US) and China on oil-exporting African countries using historical data from 1970 to 2017. It is observed that the present trade disagreement between US and China would disrupt global trade positively for some countries and negative for the others due to world trade integration. In view of this scenario, we adopt a global vector autoregression (GVAR) to examine the global effects of the two dominant countries on the output of the selected oil-exporting African countries. After establishing strong exogeneity between foreign variables and the domestic variables, the findings show that foreign output shocks are positive over the period for all the selected countries except for Angola. In addition, the effects of oil export revenue shocks are different with long-run negative effects for Nigeria and Tunisia while positive effects are found for Algeria, Angola, Egypt and Gabon. This article concludes that all the selected African countries are susceptible to external shocks from US and China trade relations.

Keywords:

• Trade wars
• oil price
• oil export
• global VAR
• weak exogeneity
• African countries

JEL:

• E32
• F42
• C32

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Notes on contributors

D. O. Olayungbo

Dr. D. O. Olayungbo is a Senior Lecturer in the Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria. The author has published many quality articles and books in reputable journals. He has taught both Macroeconomic and Microeconomics in his university both at the undergraduate and graduate levels. He is a reviewer to many top journals.