Causal relationship between oil consumption and economic growth in Ecuador

ABSTRACT

Oil has maintained a dominant form of energy source due to its flexibility and universal strength. This paper attempts to investigate the causal relationship between oil consumption and economic growth in Ecuador where oil consumption and real GDP have been rapidly increased in recent years. To this end, the paper employs Ecuadorian annual data covering the period 1965–2011. Tests for unit roots, co-integration, and Granger-causality based on the error-correction models are presented. The overall results reveal that there is unidirectional causality running from economic growth to oil consumption without any feedback effects. Thus, oil conservation policies can be initiated without deteriorating economic side-effects in Ecuador.

KEYWORDS:

• Co-integration
• economic causality
• Ecuador
• growth
• oil consumption
• unit root

Funding

This work was supported by the Korea Institute of Energy Technology Evaluation and Planning (KETEP) and the Ministry of Trade, Industry & Energy (MOTIE) of the Republic of Korea (No. 20164030201060).

Additional information

Funding

This work was supported by the Korea Institute of Energy Technology Evaluation and Planning (KETEP) and the Ministry of Trade, Industry & Energy (MOTIE) of the Republic of Korea (No. 20164030201060).