A Panel Data Application for the Relationships among Economic Growth, Oil Prices and Inflation in OPEC Countries

Abstract

In this study, the relations among economic growth, inflation and worldwide crude oil prices are examined with Dynamic Panel Data Approach. For this purpose; the relations of the selected 8 countries (Algeria, Ecuador, Gabon, Iran, Kuwait, Nigeria, Saudi Arabia and Venezuela) being the members of the Organization of the Petroleum Exporting Countries (OPEC) in terms of economic growth, inflation and reel oil prices for the period 1968-2016 are assessed. According to the findings; countries show cross section dependency in terms of the economic growth (EG) and reel crude oil prices (LOP). Panel Unit Root Test results showing the existence of the Structural Breaks support the fact that the countries are affected by the world oil shocks in terms of the related variables. There is a long-term relation among the variables of economic growth (EG), inflation (INF) and reel crude oil prices (LOP) according to the findings panel cointegration test. Also; panel causality test results support the one-sided causality relations from reel crude oil prices to economic growth, from inflation to reel crude oil prices and from economic growth to inflation.