Effects of oil on macroeconomic activity in developing countries: a cointegration analysis

The paper reports the results of a simple cointegration analysis applied to bivariate causality models and quarterly data on crude oil consumption, GDP and inflation in Thailand to investigate the long-term relationships in the sense of Granger between oil and these two major macroeconomic aggregates. For the period 1966:1 to 1991:1, the empirical evidence indicates that oil consumption, output growth and inflation rate as formulated in our models are not random walks. In addition, oil consumption is significantly cointegrated with economic growth and, unfortunately, inflation rate.