INTERACTIONS BETWEEN BUSINESS CONDITIONS, ECONOMIC GROWTH AND CRUDE OIL PRICES

Abstract

The present study aims to search empirical relationship between business conditions and crude oil prices by employing time series analysis for a list of countries. Business conditions have been proxied by real income and real industrial production as advised in the relevant literature. Results suggest that economic activity and industrial value added are in long term relationship with oil price movements in the selected countries and regions. Gross domestic product and industrial production significantly are affected by oil prices worldwide. Real income and industrial value added converge to their long term paths significantly through the channel of oil price movements. Oil price have negative impact on business activities in some countries while it has positive impact in some other countries. Therefore, the sign of coefficient of oil prices has been found to be mixed in this research study.