||Oil consumption is an important topic for the whole world. The goal of this study is to examine the causality between oil consumption and economic growth, and estimate the long-run price elasticity and income elasticity for five countries in Asian region, China, India, Taiwan, South Korea and Japan. We use ARDL(Autoregressive Distributed Lag)model and Granger causality test to find the interrelationship among oil consumption, real oil price and real Gross Domestic Product over the period 1985-2009.|
The empirical results indicate that the long-run price elasticity of oil in India, South Korea and Japan is -0.2522, -0.5079 and -0.2602 respectively and long-run income elasticity of oil in Japan is 0.6486, followed by 0.7065 in China, 0.8842 in South Korea, 0.9372 in Taiwan and 0.9691 in India. There also exists unidirectional short-run and long-run causality running from economic growth to oil consumption in China, India, Taiwan, South Korea and Japan and only unidirectional short-run causality running from oil consumption to economic growth in China, Taiwan, South Korea and Japan. This finding supports the view that the income elasticity for Asian countries is higher than the income elasticity for OECD countries, like Japan. In addition, the oil consumption is found to have positive effects on the economy. This is because the enormous use of oil in sectors like the industry may have directly pushed the economy.
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