An econometric analysis on the economic impacts of oil price fluctuations in 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 in most countries.
The purpose of the study is to analyse the impact of oil prices on economic growth in
South Africa. With less attention to the emerging ones, this study attempts to take
advantage of this research gap in order to extend the existing literature in the South
African context. 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 1990Q 1-
201401. Several sources of data (websites) like SARB, Qantec, and International
Monetary Funds (IMF), among others, were considered to find the most relevant data
for this study. The model of this study was estimated by using a cointegrating vector
autoregressive (CVAR) frame work and it was passed through a series of diagnostic
and stability. Finally the Generalised Impulse Response Function (GIRF) 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.