Causality between Oil Consumption and Economic Growth in Iran: An Ardl Testing Approach

Oil is also very important for the Iran’s economic growth. This paper studies the causal relationships between oil consumption and economic growth for Iran using cointegration and error correction model from annual data covering the period of 1980-2010. As economic growth and oil consumption variables used in empirical analysis was integrated of order one, employed Granger causality test. The results show that in the short-run, the Granger causality runs from economic growth to energy consumption In Iran. However, in the long run there is not any Granger causality relationship for this country. In other words, if unidirectional causality runs from energy consumption to income, reducing energy consumption could lead to a fall in economic growth.