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.     

Import demand of crude oil and economic growth: Evidence from India

This study establishes a long-run equilibrium relationship among quantity of crude oil import, income and price of the imported crude in India for the time span 1970–1971 to 2005–2006 using autoregressive distributed lag (ARDL) bounds testing approach of cointegration. Empirical results show that the long-term income elasticity of imported crude in India is 1.97 and there exists a unidirectional long-run causality running from economic growth to crude oil import. So reduction of crude oil import will not affect the future economic growth in India in the long-run. India should take various energy efficiency and demand side management measures in transport sector along with other measures like expanding and strengthening indigenous resource-base, substituting imported fuels by domestic fuels and de-controlling the price of petroleum products to reduce its import dependence.     

Short- and long-run effects between oil consumption and economic growth in China

This paper examines both the equilibrium relationship and the predictability between oil consumption and economic growth in China. Time series variables are employed in empirical tests. Cointegration tests suggest that these two variables tend to move together in the long run. In addition, Granger causality tests indicate that oil consumption could be a useful factor that forecasts changes in the economy in the short run as well as in the long run. The oil consumption is found to have great effects on the economy. This is because the enormous use of oil in sectors like the industry may have directly pushed the economy. However, this finding would probably stimulate faster growth in oil consumption and so should be concerned with care. Conversely, economic growth could be used as a predictive factor forecasting oil consumption only in the long run. Economic growth appears to have small effects on oil use; this could be attributed largely to China's energy consumption structure. Coal constitutes most of the energy consumption and thus the considerable demand for energy resulting from rapid economic growth could be mostly explained by the mass use of coal.     

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.     

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.     

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.     

Determinants of household energy consumption in India

Improving access to affordable modern energy is critical to improving living standards in the developing world. Rural households in India, in particular, are almost entirely reliant on traditional biomass for their basic cooking energy needs. This has adverse effects on their health and productivity, and also causes environmental degradation. This study presents a new generic modelling approach, with a focus on cooking fuel choices, and explores response strategies for energy poverty eradication in India. The modelling approach analyzes the determinants of fuel consumption choices for heterogeneous household groups, incorporating the effect of income distributions and traditionally more intangible factors such as preferences and private discount rates. The methodology is used to develop alternate future scenarios that explore how different policy mechanisms such as fuel subsidies and micro-financing can enhance the diffusion of modern, more efficient, energy sources in India.     

Electricity consumption and economic growth nexus in Portugal using cointegration and causality approaches

The aim of this paper is to re-examine the relationship between electricity consumption, economic growth, and employment in Portugal using the cointegration and Granger causality frameworks. This study covers the sample period from 1971 to 2009. We examine the presence of a long-run equilibrium relationship using the bounds testing approach to cointegration within the Unrestricted Error-Correction Model (UECM). Moreover, we examine the direction of causality between electricity consumption, economic growth, and employment in Portugal using the Granger causality test within the Vector Error-Correction Model (VECM). As a summary of the empirical findings, we find that electricity consumption, economic growth, and employment in Portugal are cointegrated and there is bi-directional Granger causality between the three variables in the long-run. With the exception of the Granger causality between electricity consumption and economic growth, the rest of the variables are also bi-directional Granger causality in the short-run. Furthermore, we find that there is unidirectional Granger causality running from economic growth to electricity consumption, but no evidence of reversal causality.     

Electricity supply,employment and real GDP in India: evidence from cointegration and Granger-causality tests

This study probes nexus between electricity supply, employment and real GDP for India within a multivariate framework using autoregressive distributed lag (ARDL) bounds testing approach of cointegration. Long-run equilibrium relationship has been established among these variables for the time span 1970–71 to 2005–06. The study further establishes long- and short-run Granger causality running from real GDP and electricity supply to employment without any feedback effect. Thus, growth in real GDP and electricity supply are responsible for the high level of employment in India. The absence of causality running from electricity supply to real GDP implies that electricity demand and supply side measures can be adopted to reduce the wastage of electricity, which would not affect future economic growth of India.     

Bounds test approach to cointegration and causality between nuclear energy consumption and economic growth in India

This paper attempts to examine the dynamic relationship between economic growth, nuclear energy consumption, labor and capital for India for the period 1969–2006. Applying the bounds test approach to cointegration developed by Pesaran et al. (2001) we find that there was a short- and a long-run relationship between nuclear energy consumption and economic growth. Using four long-run estimators we also found that nuclear energy consumption has a positive and a statistically significant impact on India's economic growth. Further, applying the Toda and Yamamoto (1995) approach to Granger causality and the variance decomposition approach developed by Pesaran and Shin (1998), we found a positive and a significant uni-directional causality running from nuclear energy consumption to economic growth without feedback. This implies that economic growth in India is dependent on nuclear energy consumption where a decrease in nuclear energy consumption may lead to a decrease in real income. For a fast growing energy-dependent economy this may have far-reaching implications for economic growth. India's economic growth can be frustrated if energy conservation measures are undertaken without due regard to the negative impact they have on economic growth.     

Carbon emissions,energy consumption and economic growth: An aggregate and disaggregate analysis of the Indian economy

This study investigates the long and short run relationships among carbon emissions, energy consumption and economic growth in India at the aggregated and disaggregated levels during 1971–2014. The autoregressive distributed lag model is employed for the cointegration analyses and the vector error correction model is applied to determine the direction of causality between variables. Results show that a long run cointegration relationship exists and that the environmental Kuznets curve is validated at the aggregated and disaggregated levels. Furthermore, energy (total energy, gas, oil, electricity and coal) consumption has a positive relationship with carbon emissions and a feedback effect exists between economic growth and carbon emissions. Thus, energy-efficient technologies should be used in domestic production to mitigate carbon emissions at the aggregated and disaggregated levels. The present study provides policy makers with new directions in drafting comprehensive policies with lasting impacts on the economy, energy consumption and environment towards sustainable development.     

Coal consumption and economic growth revisited

This paper revisits the causal relationship between coal consumption and real GDP for six major coal consuming countries for the period 1965–2005 within a vector autoregressive (VAR) framework by including capital and labour as additional variables. Applying a modified version of the Granger causality test due to Toda and Yamamoto [Toda HY, Yamamoto T. Statistical inference in vector autoregressions with possibly integrated process. J Econom 1995;66:225–50], we found a unidirectional causality running from coal consumption to economic growth in India and Japan while the opposite causality running from economic growth to coal consumption was found in China and South Korea. In contrast there was a bi-directional causality running between economic growth and coal consumption in South Africa and the United States. Variance decomposition analysis seems to confirm our Granger causality results. The policy implication is that measures adopted to mitigate the adverse effects of coal consumption may be taken without harming economic growth in China and South Korea. In contrast, for the remaining four countries conservation measures can harm economic growth.     

Energy consumption and economic growth revisited in African countries

The aim of this paper is to provide new empirical evidence on the relationship between energy consumption and economic growth for 21 African countries over the period from 1970 to 2006, using recently developed panel cointegration and causality tests. The countries are divided into two groups: net energy importers and net energy exporters. It is found that there exists a long-run equilibrium relationship between energy consumption, real GDP, prices, labor and capital for each group of countries as well as for the whole set of countries. This result is robust to possible cross-country dependence and still holds when allowing for multiple endogenous structural breaks, which can differ among countries. Furthermore, we find that decreasing energy consumption decreases growth and vice versa, and that increasing energy consumption increases growth, and vice versa, and that this applies for both energy exporters and importers. Finally, there is a marked difference in the cointegration relationship when country groups are considered.     

Electricity consumption and economic growth in seven South American countries

This paper attempts to investigate the causal relationship between electricity consumption and economic growth among seven South American countries, namely Argentina, Brazil, Chile, Columbia, Ecuador, Peru, and Venezuela using widely accepted time-series techniques for the period 1975–2006. The results indicate that the causal nexus between electricity consumption and economic growth varies across countries. There is a unidirectional, short-run causality from electricity consumption to real GDP for Argentina, Brazil, Chile, Columbia, and Ecuador. This means that an increase in electricity consumption directly affects economic growth in those countries. In Venezuela, there is a bidirectional causality between electricity consumption and economic growth. This implies that an increase in electricity consumption directly affects economic growth and that economic growth also stimulates further electricity consumption in that country. However, no causal relationships exist in Peru. The documented evidence from seven South American countries can provide useful information for each government with regard to energy and growth policy.     

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.     

Electricity consumption and economic growth: Evidence from Turkey

This study investigates the causal relationship between electricity consumption and real GDP in Turkey during the period of 1950–2000. Both of the series were found to be a stationary process around a structural break by the Zivot and Andrews test. Thus, two different methodologies have been employed to test the Granger non-causality: the Dolado–Lütkepohl test using the VARs in levels, and the standard Granger causality test using the detrended data. Both tests have yielded a strong evidence for unidirectional causality running from the electricity consumption to the income. This implies that the supply of electricity is vitally important to meet the growing electricity consumption, hence to sustain the economic growth in Turkey.     

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.     

The relationship among energy prices and energy consumption in China

The pricing mechanism for energy is not in line with the international standards, because the energy prices are controlled by the government partly or completely in China. Chinese government made a lot of efforts to improve the pricing mechanism for energy. The relations between Chinese energy prices and energy consumption are the foundations to reform the mechanism. In this paper, the relations between Chinese energy consumption and energy prices are researched by cointegration equations, impulse response functions, granger causality and variance decomposition. The cointegration relations among energy prices, energy consumption and economic outputs show that higher energy price will decrease energy consumption in Chinese industrial sectors but will not reduce the economic output in the long run. The cointegration relation between energy price and household energy consumption shows that higher energy price will decrease household energy consumption in the long run and increase it in the short run. So Chinese government should deepen the reform of pricing mechanism for energy, and increase the energy prices reasonably to save energy.     

The role of natural gas consumption and trade in Tunisia's output

This paper examines the impact of natural gas consumption, real gross fixed capital formation and trade on the real GDP in the case of Tunisia over the period 1980–2010. We use an Autoregressive Distributed Lag (ARDL) bounds testing approach to test for cointegration between the variables. The Toda–Yamamoto approach is then used to test for causality. Our findings indicate the existence of a long-term relationship between the variables. Natural gas consumption, real gross fixed capital formation and trade add in economic growth. Natural gas consumption, real gross fixed capital formation and real trade cause real GDP in Tunisia. These findings open up new insights for policymakers to formulate a comprehensive energy policy to sustain economic growth in the long-term.     

Economic growth,energy consumption and CO2 emissions in India: a disaggregated causal analysis

This study examines the long-run and short-run causal relationships among energy consumption, real gross domestic product (GDP) and CO₂ emissions using aggregate and disaggregate (sectoral) energy consumption measures utilising annual data from 1971 to 2011. The autoregressive distributed lag bounds test reveals that there is a long-run relationship among the variables concerned at both aggregate and disaggregate levels. The Toda–Yamamoto causality tests, however, reveal that the long-run as well short-run causal relationship among the variables is not uniform across sectors. The weight of evidences of the study indicates that there is short-run causality from electricity consumption to economic growth, and to CO₂ emissions. The results suggest that India should take appropriate cautious steps to sustain high growth rate and at the same time to control emissions of CO₂. Further, energy and environmental policies should acknowledge the sectoral differences in the relationship between energy consumption and real gross domestic product.