Non-linear oil price specifications and economic growth in Morocco: an econometric analysis using the producer price index channel

Abstract

The producer price channel is of key importance in the relationship between oil prices and economic growth. This channel refers to the way in which oil price variations propagate through the economy, influencing companies' production costs. When the price of oil rises, so do companies' production costs. This is due to the dependence of many industries on oil as a source of energy or raw material. With this in mind, a study was conducted using Vector Autoregressive (VAR) modeling covering the period from the first quarter of 1998 to the fourth quarter of 2018, to analyze the indirect effects of oil price shocks on Moroccan economic growth via the Producer Price Index (PPI). The empirical analysis demonstrated that the non-linear specifications of the crude oil price (NOPI4T, NOPI8T, NOPI12T) relating to episodes of oil price rises have a direct impact on the levels of production rates, without, however, these effects being transmitted indirectly to economic growth via the industrial production channel.

Keywords: oil price shocks, producer price index, VAR model, GDP.

JEL Classification : C1, E31, F43

Paper type : Empirical research.