The real influences of oil prices changes on the growth of real GDP: The case of South Africa

Abstract

Oil price fluctuation is a cause of concern for most of the economies of the world including South Africa. The premise is that since oil consumption is regarded as one of the major determinants of the economic activities in any country, therefore the price fluctuations have a potential of slowing down the economic growth. The purpose of this study is to analyse the influences of oil price changes on economic growth in South Africa. Determining such a relationship will not only be helpful to the academic community, but also to the policy makers and the international community. The study utilises secondary data to examine quarterly time series data from the year 1990Q1-2014Q1. Several sources of data (websites) like SARB, Quantec, and International Monetary Funds, among others, were considered to find the most relevant data. The model was estimated by using a co-integrating vector autoregressive frame work and it was passed through a battery of diagnostic and stability test. The Generalised Impulse Response Function was employed to examine the dynamic relations among the variables under study. The results show that there is a positive relationship between economic growth and oil prices fluctuations.