Causal Dynamics Between Oil Consumption and Economic Growth in South Africa

Abstract

This article assesses the long-run and causal relationships between oil consumption and economic growth in South Africa over the period 1970–2008. The study analyzes the relationships within a multivariate framework that includes capital. Cointegration test results indicate that these three variables have a stable long-run relationship. Using the Toda and Yamamoto (1995) approach to Granger non-causality, our results indicate evidence of unidirectional causality from oil consumption to economic growth. We therefore find evidence in support of the growth hypothesis, where oil consumption contributes to economic growth both directly and indirectly as a complement to other inputs in the production process.

Keywords:

• economic growth
• Granger causality
• oil consumption
• seemingly unrelated regression
• South Africa