DO OIL PRICE SHOCKS MATTER TO CONSUMERS IN ZAMBIA? AN SVAR APPROACH

This study investigated the impact of decomposed oil price shocks on household consumption in Zambia from 1985-2019. A structural Vector Autoregressive Model (SVAR) was used to measure contemporaneous consumption, and complemented by Impulse Response Functions (IRFs), Granger Causality Tests Forecast Error Variance Decompositions (FEVD). The existence long-run relationships determined cointegration tests. findings revealed that neither had short-run nor impacts at 5% level. Notwithstanding, it found oil-specific demand granger-causes were attributed for largest variation i.e. 6.5%. implied historic fuel subsidies insulated consumers adverse effects shocks. Therefore, Zambian Government should introduce smart, optimal energy which have a less distortionary effect its fiscal position. KEYWORDS - Oil Price Shocks, Structural Autogressive Model, Decomposition, Consumption, Functions, Causality,