The Causality Linkages between Oil Prices, Oil Intensity and Technical Progress in Tunisia

Abstract :

This paper explores the relationship between oil prices, oil intensity and technical progress for Tunisian economy for the period of 1980-2014. In doing so, we have applied ADF and PP unit root tests to examine whether series contains unit root or not. The combined cointegration test is applied to look whether cointegration relationship exists or does not between the variables. The causal linkage between the variables is investigated by the VECM Granger causality test and robustness of causality analysis is investigated by applying the innovative accounting approach. The results show the existence of cointegration between oil prices, fuel rate and oil intensity. The causality test confirms the unidirectional causal running from oil prices and oil intensity to fuel rate.