International Journal of Social Science & Economic Research
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Title:
THE IMPACT OF OIL PRICE ON ECONOMIC GROWTH: TEST OF GRANGER CAUSALITY, THE CASE OF OECD COUNTRIES

Authors:
Sabna Ali

Abstract:
Oil represents 40% of OECD countries s energy mix. Despite energy efficiency policies and programmes, these countries are still highly oil dependent. Oil price increase will have short run negative impacts long run damaging impacts on these economies. Hence the understanding of the mechanisms through which oil price affect the economic activity is important for policy makers in these countries as well as other net oil importing countries. The purpose of this paper is to investigate the granger causality between oil prices and economic growth using time series data between 1970- 2011. Based on this paper results, oil prices granger cause the economic growth in the short run but not in the long run. It also shows that economic growth dose not grangercause oil prices neither in the short run nor in the long run.

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