Oil Consumption and Economic Growth: Evidence from Korea

This article investigates the short- and long-run causality issues between oil consumption and economic growth in Korea by applying modern time-series techniques. It employs annual data covering the period 1968–2002. Tests for unit roots, cointegration, and a Granger-causality based on error-correction model are presented. The results show that bidirectional causality runs from oil consumption to economic growth in Korea. This means that an increase in oil consumption directly affects economic growth and that economic growth also stimulates further oil consumption.

Keywords:

• oil consumption
• economic growth
• Granger-causality
• unit root
• cointegration
• error-correction model

Notes

* Represents the rejection of the null hypothesis at a 10% level of significance

* Indicates the rejection of the null hypothesis at a 10% level of significance

* denote the rejection of the null hypothesis at 10% and 5% levels of significance, respectively

** denote the rejection of the null hypothesis at 10% and 5% levels of significance, respectively