In this paper we examine the causal relationship between oil price and economic growth using data from Iran.
Previous studies on this subject suffer from three major limitations. In this study we incorporate the oil consumption
in the bivariate causality model between oil price and economic growth - thereby creating a simple bivariate
causality model. Our empirical results show that there is a distinct unidirectional causal flow from oil consumption
to oil price in Iran. Results show that neutral effect of oil price on economic growth as such the significance for
error-correction term is not statistically supported.