Oil Prices and Economic Growth in SAARC Members Countries

Abstract

The oil price is a dominant factor to affect the economic growth. This study analyzes the influence of oil prices on economic growth of member countries of South Asian Association for Regional Cooperation (SAARC). The dynamic effects of such oil prices are estimated by the mean of Pooled Mean Group Autoregressive Distributed Lag Model (ARDL) and Panel Fully Modified Least Square (FMOLS). The time series data are used for the period of 1995 to 2023. The results concluded oil prices to significantly affect economic growth and in negative. However, fuel imports are found to favor the economic growth. Likewise, labor force and Gross Fixed Capital (GCF) formation have significant and positive effect on economic growth. The findings on ARDL and FMOLS are similar. Noticeable, in case of short run, oil prices effect on economic growth is insignificant. It shows that effect of oil prices on economic growth is recordable in long run. The study concludes oil prices to have significant role towards economic growth. However, negative affectation of oil prices cannot be taken in a way that SAARC member better start losing their dependency on oil but to explore substitute energy sources.