The relationship between oil prices and economic growth in European countries: Panel SUR model

Oil prices are an essential input for economic activities. In the literature, the relationship between oil prices and economic growth has been primarily examined in the context of oil-producing and oil-importing countries. Among the European countries, there are significant oil-producing countries, including Norway, Italy, Denmark, and Romania. In this respect, this research examined the possible relationships between economic growth and oil prices in European countries from 1990 to 2023 using the Panel Unrelated Regression (SUR) model. The findings of the SUR model, where economic growth is the dependent variable, indicate that a 1% increase in oil prices results in a 0.86% increase in growth, which is statistically significant. The findings of the SUR model, where the change in oil prices is the dependent variable, indicate that a 1% increase in growth increases oil prices by approximately 0.12% under statistical significance. Dumitrescu & Hurlin Granger causality findings provide empirical evidence of bidirectional causality relationships reflecting the feedback effect between economic growth and oil prices. Therefore, the analysis results suggest that the increase in oil prices is a latent force supporting economic growth in European countries.