An Investigation of Granger Causality between Oil-Price, Inflation and Economic Growth in Jordan

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Hussein Ali Al-Zeaud
Hussein Ali Al-Zeaud
1 Al al-Bayt university Mafraq-Jordan

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This paper is an empirical investigation on the directional causality between oil price (oil imports cost), gross domestic product (GDP) and Inflation (consumer price index) for the period 1990-2011 in Jordan. Using Johannes-Juseliusco-integration test, Granger-causality test, and VECM to inspect the long-term relationship, the short-term relationship and the speed of adjustment toward long-term equilibrium between the variables. The tests’ results indicate that there is a long-run equilibrium relationship between gross domestic product these results indicate that there is a long-run equilibrium relationship between gross domestic product (LGDP) and other variables oil cost (LOP) and inflation (LINF). The estimation of the adjustment speed indicates that (58%) of any previous year’s deviation in gross domestic product (GDP) from its long-run equilibrium path will be corrected in the current year. Furthermore, the VECM reveals the existence of a significant, negative and weak (-0.046) causation relationship in the short run between (GDP) and oil cost (OP) running from oil cost to (GDP).

Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

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Not applicable for this article.

Hussein Ali Al-Zeaud. 2014. \u201cAn Investigation of Granger Causality between Oil-Price, Inflation and Economic Growth in Jordan\u201d. Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 14 (GJMBR Volume 14 Issue B6): .

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GJMBR Volume 14 Issue B6
Pg. 33- 41
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Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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v1.2

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October 6, 2014

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English

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This paper is an empirical investigation on the directional causality between oil price (oil imports cost), gross domestic product (GDP) and Inflation (consumer price index) for the period 1990-2011 in Jordan. Using Johannes-Juseliusco-integration test, Granger-causality test, and VECM to inspect the long-term relationship, the short-term relationship and the speed of adjustment toward long-term equilibrium between the variables. The tests’ results indicate that there is a long-run equilibrium relationship between gross domestic product these results indicate that there is a long-run equilibrium relationship between gross domestic product (LGDP) and other variables oil cost (LOP) and inflation (LINF). The estimation of the adjustment speed indicates that (58%) of any previous year’s deviation in gross domestic product (GDP) from its long-run equilibrium path will be corrected in the current year. Furthermore, the VECM reveals the existence of a significant, negative and weak (-0.046) causation relationship in the short run between (GDP) and oil cost (OP) running from oil cost to (GDP).

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An Investigation of Granger Causality between Oil-Price, Inflation and Economic Growth in Jordan

Hussein Ali Al-Zeaud
Hussein Ali Al-Zeaud Al al-Bayt university Mafraq-Jordan

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