The causality Relationship between Oil Price, Industrial Products, Economic Growth and Inflation: A Case Study of Iran

Taghinezhadomran, Vahid; Ahmadinejad, Hosein; Erfanian, Mohamad

doi:10.22075/jem.2019.17012.1264

The causality Relationship between Oil Price, Industrial Products, Economic Growth and Inflation: A Case Study of Iran

Document Type : Original Article

Authors

Vahid Taghinezhadomran ¹

hosein ahmadinejad ²

mohamad erfanian ³

¹ Economics/ Mazandaran University/ Bablsar/ Iran

² کارشناسی ارشد دانشگاه مازندران

³ university of qom ma

10.22075/jem.2019.17012.1264

Abstract

Oil price shock can be the main source of disturbance in the oil - producing economy, such as Iran; therefore, the study of the interaction between oil prices and macroeconomic variables is important. This study examines the Granger causality relationship between oil price, inflation, industrial products and economic growth, based on data from Iran for the period 1980 - 2017 using VAR approach. The results indicate that 1) the economic growth is affected by the oil price and inflation; While, industrial products have not been the cause of Iranian economic growth in the studied period, 2) economic growth positively react to positive oil price shock, but as time goes on its effect fades, 3) in the short-run, the positive inflation shock causes a reduction in economic growth and industrial products, and 4) in the short-run, the positive inflation shock due to the uncertainty in business atmosphere, may reduce the growth of industrial products, but in the long run, due to adjustments in the industrial sector and an increase in the price of the products, the growth of industrial products becomes positive.

Keywords

Oil price growth

Industrial growth

Inflation

Economic Growth

Granger causality