Econometric analysis of oil consumption and economic growth in Nepal

Abstract

Oil is one of the main inputs for many sectors like transportation, manufacturing, electricity generation and others. Oil is also very important for the economic growth of Nepal. This paper examines the short and long-run causality between oil consumption and Gross Domestic Product for Nepal using annual data covering the period of 1975-2009. Granger causality test is employed to analyse the relationship between economic growth and oil consumption variables with same order of integration (I (1)). In this study is found that there exists bi-directional Granger causality between oil consumption and economic growth in the short and long run.

Key words: Oilconsumption; Economic Growth; Causality; Co-integration

Economic Journal of Development Issues

Vol. 11 & 12 No. 1-2 (2010) Combined Issue

Page: 135-143

Uploaded date: 10 April, 2012