The Impact of Oil Price Fluctuations on Bangladesh’s Economic Growth: An Econometric Approach

Abstract

The study explores whether or not oil price enhances economic growth. Furthermore, the result is not still clearly checked in case of Bangladesh. Therefore, this paper aims to examine the true impacts of oil derivatives on the economic growth of Bangladesh over the period of 1986-2021 considering GDP as a proxy variable of economic growth. Consumer price index (CPI) has been used as a control variable. Different statistical test i.e., Unit Root Test, Jarque-Bera Test have been executed. For non-stationary data, OLS is deceptive. The assumption of stationary is undercut by non- stationary data, making OLS conclusions erroneous. ARMA non-stationary data modelling is more accurate. ARMA estimator for linear models on a sample covering up to 36 years’ time series data, the econometric estimation suggested that cointegration exists between oil price and economic growth with a significant positive coefficient. For policy implications, this research provides evidence that in an emerging country like Bangladesh, fuel expenditure might cause a determinant impact on the overall economic growth. Therefore, the government should emphasize more on research and development to be self-sufficient for the supply of oil instead of importing.