The purpose of this research is to study the relationship between oil prices, economic activities and inflation of G7 countries over the period from 1975 to 2008 by applying panel data. Having analyzing the unit root test, it has been found that all variables are stationary in first-order difference. Hausman test suggests the fixed-effect model. Pedroni test also shows that the variables are not co-integrated. By applying short term Granger test, it has been specified that there is a bilateral relationship between unemployment and economic growth and price shock is the cause of growth and inflation.

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