Panel Granger causality between oil consumption and GDP : evidence from BRICS countries

Abstract

This paper examines the causal relationship between oil consumption and economic growth in the BRICS countries for the period from 1985 to 2011. We employ a panel causality approach which accounts for both cross-sectional dependency and heterogeneity across countries. The empirical results support the view that oil consumption and economic growth are not sensitive to each other for the panel of BRICS countries. Looking at the individual country results, there is only some evidence for China of a bidirectional causality. The lack of sensitivity between oil consumption and GDP for the BRICS countries indicates that policies aiming at reducing the use of crude oil will have minor to no effect on the economic growth and development of the BRICS countries.