Causality between energy consumption and economic growth in India: a note on conflicting results

This note examines the different direction of causal relation between energy consumption and economic growth in India. Applying Engle–Granger cointegration approach combined with the standard Granger causality test on Indian data for the period 1950–1996, we find that bi-directional causality exists between energy consumption and economic growth. Further, we apply Johansen multivariate cointegration technique on the different set of variables. The same direction of causality exists between energy consumption and economic growth. This is different from the results obtained in earlier studies.     

The causality between energy consumption and economic growth in Turkey

This paper applies the causality test to examine the causal relationship between primary energy consumption (EC) and real Gross National Product (GNP) for Turkey during 1970–2006. We employ unit root tests, the augmented Dickey–Fuller (ADF) and the Philips–Perron (PP), Johansen cointegration test, and Pair-wise Granger causality test to examine relation between EC and GNP. Our empirical results indicate that the two series are found to be non-stationary. However, first differences of these series lead to stationarity. Further, the results indicate that EC and GNP are cointegrated and there is bidirectional causality running from EC to GNP and vice versa. This means that an increase in EC directly affects economic growth and that economic growth also stimulates further EC. This bidirectional causality relationship between EC and GNP determined for Turkey at 1970–2006 period is in accordance with the ones in literature reported for similar countries. Consequently, we conclude that energy is a limiting factor to economic growth in Turkey and, hence, shocks to energy supply will have a negative impact on economic growth.     

The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian developing countries

This paper estimates the causal relationships between energy consumption and income for India, Indonesia, the Philippines and Thailand, using cointegration and error-correction modelling techniques. The results indicate that, in the short-run, unidirectional Granger causality runs from energy to income for India and Indonesia, while bidirectional Granger causality runs from energy to income for Thailand and the Philippines. In the case of Thailand and the Philippines, energy, income and prices are mutually causal. The study results do not support the view that energy and income are neutral with respect to each other, with the exception of Indonesia and India where neutrality is observed in the short-run.     

The role of coal consumption in the economic growth of the Polish economy in transition

The main goal of this paper is an analysis of the causal links between quarterly coal consumption in the Polish economy and GDP. For the sake of accurate computation an additional variable – employment – was also taken into account. Computations conducted for the period Q1 2000 to Q4 2009 by means of recent causality techniques confirmed the neutrality of hard coal usage with respect to economic growth. On the other hand, calculations for the pairs lignite-GDP and total coal consumption-GDP showed the existence of a significant nonlinear causality from coal usage to economic growth. This is clear evidence for claiming that lignite plays an important role in the economic growth of the Polish economy. Furthermore, each coal-related variable was found to have a nonlinear causal impact on employment. Because of the relatively short length of available time series we additionally applied bootstrap critical values. The empirical results computed by both methods did not exhibit significant differences.     

Relationship between electricity consumption and economic growth of Guangdong Province in China

Guangdong is a province with the most electricity consumption (EC) and the fastest economic growth in China. However, there has long been a contradiction between electricity supply and demand in Guangdong and this trend may exist for a long time in the foreseeable future. Therefore, the research on the relationship between EC and economic growth of Guangdong is of very important practical significance to the formulation of relevant policy. In this paper, the econometrics method of granger causality test and co-integration test is used to analyze the relationship between EC and economic growth of Guangdong from 1978 to 2010. The results indicate that there is unidirectional causality between the economic growth and the EC, and the growth of gross domestic product (GDP) and gross industrial output value (GIOV) is the impetus to promote the growth of installedβcapacity (ICAP) and the EC. Therefore, the appropriate restraint of excessive growth of power industry will not necessarily slow down economic growth. There has been a long-term stable equilibrium relationship between the EC and the economic growth. When the GDP and GIOV grows 1 unit respectively, the EC of Guangdong province will increase 0.97 and 0.64 unit respectively. The long-term marginal utility of the EC is more than 1.     

Causality relationship between electricity consumption and GDP in Bangladesh

In this paper, we examine the causal relationship between the per capita electricity consumption and the per capita GDP for Bangladesh using cointegration and vector error correction model. Our results show that there is unidirectional causality from per capita GDP to per capita electricity consumption. However, the per capita electricity consumption does not cause per capita GDP in case of Bangladesh. The finding has significant implications from the point of view of energy conservation, emission reduction and economic development.     

Energy consumption and economic growth for selected OECD countries: Further evidence from the Granger causality test in the frequency domain

This paper aims to reexamine the causal relationship between energy consumption and economic growth for 20 OECD countries. To that end, we employ a Granger causality test in the frequency domain which allows us to distinguish short (temporary) and long-run (permanent) causality. The empirical results could be summarized as following. First, in terms of causality running from GDP to energy consumption, there is a temporary relationship for Australia, Austria, Canada, Italy, Japan, Mexico, the Netherlands, Portugal, the UK, the USA, and a permanent relationship for Austria, Belgium, Denmark, Germany, Italy, Japan, the Netherlands, Norway, and the USA. Second, in terms of causality running from energy consumption to GDP, there is a temporary relationship for Austria, Denmark, Italy, the Netherlands, Norway and Portugal, and a permanent relationship for Belgium, Finland, Greece, Italy, Japan, and Portugal. The main implication of our finding is that the energy policies should take into consideration not only the causality direction between economic growth and energy consumption but also whether it is temporal or permanent and furthermore authorities must design policy actions accordingly.     

Electricity consumption and economic growth in China: Cointegration and co-feature analysis

This paper applies the cointegration theory to examine the causal relationship between electricity consumption and real GDP (Gross Demostic Product) for China during 1978–2004. Our estimation results indicate that real GDP and electricity consumption for China are cointegrated and there is only unidirectional Granger causality running from electricity consumption to real GDP but not the vice versa. Then Hodrick–Prescott (HP) filter is applied to decompose the trend and fluctuation component of the GDP and electricity consumption series. The estimation results indicate that there is cointegration between not only the trend components, but also the cyclical components of the two series, which implies that, the Granger causality is probably related with the business cycle. The estimation results are of policy implication to the development of electric sector in China.     

The causal relationship between energy resources and economic growth in Brazil

This study investigates the causal relationship between clean and non-clean energy consumption and economic growth in Brazil over the period of 1980–2009. Clean energy consumption at aggregated level of total renewable energy consumption and disaggregated levels of hydroelectric, new renewables, and nuclear energy consumption are tested within a production function framework. A cointegration test reveals a long-term equilibrium relationship between real output, capital, labor, and renewable and non-renewable energy consumption at aggregated level, and a long-term equilibrium relationship between real output, capital, labor, and hydroelectric/new renewables/nuclear and fossil fuel energy consumption at disaggregated level. The capital, labor, and new renewables elasticities of real output are positive and statistically significant, other energy consumption item's elasticities are insignificant. The results from error correction model reveal the interdependencies between new renewables, nuclear, fossil fuel, and total non-renewable energy consumption and economic growth, the unidirectional causality from hydroelectric/total renewable consumption to economic growth, the substitutability between new renewables and fossil fuel consumption, and the substitutability between new renewables and nuclear energy consumption. Additionally, nuclear and new renewables energy consumption responds to bring the system back to equilibrium. Overall, aggregated analysis may obscure the relationship between different types of clean energy consumption and economic growth.     

The relationship between energy and production: Evidence from Turkish manufacturing industry

This paper investigates the relationship between energy and production at the industry level in an emerging market, Turkey, in a multivariate framework. The electricity consumption and value added relation is examined in the Turkish manufacturing industry, while also accounting for labor and fixed investment. We find that labor, fixed investment, electricity consumption, and value added are related via three cointegrating vectors. The VEC results indicate uni-directional causality running from electricity consumption to value added. Generalized impulse response and variance decomposition analyses confirm these results. Thus, energy input appears to be closely related to production. Hence, energy saving technologies and increased energy efficiency may increase the growth in manufacturing value added.     

The long-run and short-run effects of oil price on energy consumption in Tunisia: Evidence from structural breaks analysis

ABSTRACT

Since its revolution in 2010, Tunisia has known a drastic decrease of its GDP reaching the lowest level during the two last decades. In this context, this paper examines the relationship between oil prices, GDP and energy consumption for Tunisia over the 1986–2014 period. The error-correction model (VECM) is employed to investigate the dynamic causality relationships among the variables. In the short run, we find unidirectional causality from oil price and energy consumption to GDP, but this does not indicate unidirectional causality from energy consumption and GDP to oil price. In the long run, our results suggest the existence of a bi-directional Granger causality between oil price, energy consumption, and GDP. We thus propose policy suggestions to solve the energy and sustainable development dilemma in Tunisia, such as encouraging the development of renewable energy, controlling energy consumption through more ambitious programs of energy efficiency and rational use of energy.     

Energy consumption and economic growth: Evidence from China at both aggregated and disaggregated levels

Using a neo-classical aggregate production model where capital, labor and energy are treated as separate inputs, this paper tests for the existence and direction of causality between output growth and energy use in China at both aggregated total energy and disaggregated levels as coal, oil and electricity consumption. Using the Johansen cointegration technique, the empirical findings indicate that there exists long-run cointegration among output, labor, capital and energy use in China at both aggregated and all three disaggregated levels. Then using a VEC specification, the short-run dynamics of the interested variables are tested, indicating that there exists Granger causality running from electricity and oil consumption to GDP, but does not exist Granger causality running from coal and total energy consumption to GDP. On the other hand, short-run Granger causality exists from GDP to total energy, coal and oil consumption, but does not exist from GDP to electricity consumption. We thus propose policy suggestions to solve the energy and sustainable development dilemma in China as: enhancing energy supply security and guaranteeing energy supply, especially in the short run to provide adequate electric power supply and set up national strategic oil reserve; enhancing energy efficiency to save energy; diversifying energy sources, energetically exploiting renewable energy and drawing out corresponding policies and measures; and finally in the long run, transforming development pattern and cut reliance on resource- and energy-dependent industries.     

Oil consumption and economic growth: Evidence from Pakistan

This study attempts to look into the causal relationship between oil consumption and economic growth in Pakistan where oil consumption and real gross domestic product (GDP) have increased rapidly in recent years. To this end, the study employs annual data covering the period 1965–2015. Tests for unit roots, co-integration, and Granger causality based on the error-correction models (ECMs) are presented. The overall results support the existence of bidirectional causality between oil consumption and economic growth in Pakistan. This means that an increase in oil consumption directly affects economic growth. Thus, in order not to cause an adverse effect on economic growth, Pakistan should endeavor to overcome the constraints on oil consumption. Moreover, it appears that economic growth induces increased oil consumption.     

Energy consumption and economic activities in Iran

The causal relationship between overall GDP, industrial and agricultural value added and consumption of different kinds of energy are investigated using vector error correction model for the case of Iran within 1967–2003. A long-run unidirectional relationship from GDP to total energy and bidirectional relationship between GDP and gas as well as GDP and petroleum products consumption for the whole economy was discovered. Causality is running from value added to total energy, electricity, gas and petroleum products consumption and from gas consumption to value added in industrial sector. The long-run bidirectional relations hold between value added and total energy, electricity and petroleum products consumption in the agricultural sector. The short-run causality runs from GDP to total energy and petroleum products consumption, and also industrial value added to total energy and petroleum products consumption in this sector.     

On the dynamics of aggregate output,electricity consumption and exports in Malaysia: Evidence from multivariate Granger causality tests

This paper employs annual data from 1971 to 2006 to examine the causal relationship between aggregate output, electricity consumption, exports, labor and capital in a multivariate model for Malaysia. We find that there is bidirectional Granger causality running between aggregate output and electricity consumption. The policy implication of this result is that Malaysia should adopt the dual strategy of increasing investment in electricity infrastructure and stepping up electricity conservation policies to reduce unnecessary wastage of electricity, in order to avoid the negative effect of reducing electricity consumption on aggregate output. We also find support for the export-led hypothesis which states Granger causality runs from exports to aggregate output. This result is consistent with Malaysia pursuing a successful export-orientated strategy.     

Clean energy consumption and economic growth nexus: asymmetric time and frequency domain causality testing in China

ABSTRACT

This article examines the symmetric and asymmetric causal relationships between clean energy consumption and economic growth in time and frequency domains for China. The results of both symmetric and asymmetric causality analysis suggest that clean energy consumption does not cause economic growth. This implies that the level of clean energy consumption in China seems to be optimal and beyond this level, it does not affect the growth level of the country. However, examination of the causality linkage from economic growth to clean energy consumption indicates medium and long-run evidence of a frequency-based symmetric causal relationship. Our asymmetric analysis makes this relation clearer such that only the adverse shocks to economic growth lead to a decline in the clean energy consumption level. This inference is complemented with the estimated causal parameter of 0.13, indicating that a 1% decrease in economic growth results in a 0.13% reduction in the level of clean energy consumption.     

Energy consumption and economic growth in the light of meeting the targets of energy policy in the EU: The bootstrap panel Granger causality approach

The aim of the paper is to assess linkages between energy consumption and economic growth in the light of compliance with the EU energy policy targets stated in the climate and energy package for 2020 in the European Union member states in the period 1993–2011. The study is divided into two main stages. During the first one, using cluster analysis methods, four groups of countries which met three energy policy targets stated in the package at similar levels were identified. During the second stage, the bootstrap Granger panel causality approach proposed by Kònya (2006) was used to verify the hypothesis of causality between energy consumption and economic growth in the countries from four groups created in the previous step. The global financial crisis was also taken into account. The results obtained reveal that the level of compliance with energy policy targets influences linkages between energy consumption and economic growth. The results indicate causal relations in the group of countries with the greatest reduction of greenhouse gas emissions, the highest reduction of energy intensity and the highest share of renewable energy consumption in total energy consumption. In the remaining groups the results mostly confirm the neutrality hypothesis.     

Nuclear energy consumption and economic growth in OECD countries: Cross-sectionally dependent heterogeneous panel causality analysis

The purpose of this study is to determine the direction causality between nuclear energy consumption and economic growth in OECD countries. The empirical model that includes capital and labor force as the control variables is estimated for the panel of fourteen OECD countries during the period 1980–2007. Apart from the previous studies in the nuclear energy consumption and economic growth relationship, this study utilizes the novel panel causality approach, which allows both cross-sectional dependency and heterogeneity across countries. The findings show that there is no causality between nuclear energy consumption and economic growth in eleven out of fourteen cases, supporting the neutrality hypothesis. As a sensitivity analysis, we also conduct Toda–Yamamoto time series causality method and find out that the results from the panel causality analysis are slightly different than those from the time-series causality analysis. Thereby, we can conclude that the choice of statistical tools in analyzing the nature of causality between nuclear energy consumption and economic growth may play a key role for policy implications.