The impact of rising oil prices on the South African economy

Abstract

Significant literature exists regarding the relationship between macroeconomic variables and stock market returns both locally and internationally. There is limited literature around oil prices and its impact on the South African (SA) economy. This research investigated the relationship between oil prices and macroeconomic variables in South Africa, like the United States Dollar / South African Rand (USD/ZAR) exchange rates, Inflation (CPI), Gross Domestic Product (GDP), and Interest rates. Monthly data was collected for all variables besides GDP (which was collected on a quarterly basis) from the period 1997 to June 2012. A quantitative research via regression analysis was carried out in order to determine if there was any significant relationship.The findings were that there was a significant relationship between the USD/ZAR exchange rates at 1%, 5% and 10% significance levels as well as with GDP at the 5% and 10% significance levels. There seems to be no significant relationship between oil prices and inflation, as well as oil prices and interest rates at the 1%, 5% and 10% significance levels.