Test of Causality Between Oil Price and GDP Growth in Algeria Zouaoui Chikr Elmezouar, A. Mazri, M. Benzaire, and AEK. Boudi Abstract This paper seeks to investigate the causal relationship between oil prices and economic growth in Algeria. The empirical analysis starts by analyzing the time series properties of the data which is followed by examining the nature of causality among the variables. Algeria is an oil-producing rather oil-exporting country. An increase in oil price increases economic growth. This study analyzes how change in real crude oil price affects the real GDP of Algeria positively. The empirical analysis involves testing the time series characteristics of the data series (stationary) using ADF test and running the pairwise Granger causality test based on EViews software. Keywords Oil price • Economic growth • Cointegration • Granger causality • Algeria 1 Introduction Algeria is the second largest oil producer, after Nigeria, in Africa. It became a member of the Organization of the Petroleum Exporting Countries (OPEC) in 1969, shortly after it began oil production in 1958. Currently, the country is heavily reliant on its hydrocarbon sector, which accounted for almost 70 percent of government budget revenue and grants and about 98 percent of export earnings in 2011, according to the International Monetary Fund. In recent years, crude oil production has been stagnant, because new production and infrastructure projects have repeatedly been delayed. Additionally, in the last Z. Chikr Elmezouar () • A. Mazri • M. Benzaire • AEK. Boudi Laboratory of Economic Studies and Local Development in South West of Algeria, University of Bechar, Bechar, Algeria e-mail: chikrtime@yahoo.fr; mazeriabdelhafid@yahoo.fr; benzairmebarek@yahoo.fr; dr.boudi@yahoo.fr A.R. Ansari (ed.), Advances in Applied Mathematics, Springer Proceedings in Mathematics & Statistics 87, DOI 10.1007/978-3-319-06923-4__19, © Springer International Publishing Switzerland 2014 205