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Oil-Growth Nexus in Oil Producing Countries: Macro Panel Evidence

Listed author(s):
  • José Alberto Fuinhas

    (NECE and University of Beira Interior, Management and Economics Department, Estrada do Sineiro, 6200-209 Covilhã, Portugal.)

  • António Cardoso Marques

    (NECE and University of Beira Interior, Management and Economics Department, Estrada do Sineiro, 6200-209 Covilhã, Portugal.)

  • Alcino Pinto Couto

    (NECE and University of Beira Interior, Management and Economics Department, Estrada do Sineiro, 6200-209 Covilhã, Portugal.)

The oil consumption-economic growth nexus is examined in a panel of oil producing countries over a long time span (1965-2012). Both, the ratio of oil production to primary energy consumption, i.e. oil self-sufficiency, and the persistence of the second structural oil shock were controlled for. The phenomenon of cross-sectional dependence that is present in the panel confirms that these countries share common spatial patterns, unobserved common factors, or both. The cointegration/long memory relationships as well as the panel data estimators’ appropriateness are analysed and discussed. A dynamic Driscoll-Kraay estimator, with fixed effects, was shown to be adequate to cope with the phenomena of heteroskedasticity, contemporaneous correlation, first order autocorrelation and cross-sectional dependence present in the panel. The results are consistent with the growth hypothesis, i.e. that oil consumption proves be a driver of economic growth. The second structural oil break (1979), reveals the long-lasting positive effect exerted by oil consumption on growth. The ratio of oil production to primary energy consumption has exerted a positive impact on growth. Thus, policymakers should take into account the benefits of promoting oil self-sufficiency, by reinforcing the use of endogenous resources.

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Article provided by Econjournals in its journal International Journal Of Energy Economy And Policy.

Volume (Year): 5 (2015)
Issue (Month): 1 ()
Pages: 148-163

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Handle: RePEc:eco:journ2:2015-01-12
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