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.