Nuclear energy consumption, oil prices, and economic growth: Evidence from highly industrialized countries

This study utilizes the Johansen cointegration technique, the Granger non-causality test of Toda and Yamamoto (1995), the generalized impulse response function, and the generalized forecast error variance decomposition to examine the dynamic interrelationship among nuclear energy consumption, real oil price, oil consumption, and real income in six highly industrialized countries for the period 1965-2008. Our empirical results indicate that the relationships between nuclear energy consumption and oil are as substitutes in the U.S. and Canada, while they are complementary in France, Japan, and the U.K. Second, the long-run income elasticity of nuclear energy is larger than one, indicating that nuclear energy is a luxury good. Third, the results of the Granger causality test find evidence of unidirectional causality running from real income to nuclear energy consumption in Japan. A bidirectional relationship appears in Canada, Germany and the U.K., while no causality exists in France and the U.S. We also find evidence of causality running from real oil price to nuclear energy consumption, except for the U.S., and causality running from oil consumption to nuclear energy consumption in Canada, Japan, and the U.K., suggesting that changes in price and consumption of oil influence nuclear energy consumption. Finally, the results observe transitory initial impacts of innovations in real income and oil consumption on nuclear energy consumption. In the long run the impact of real oil price is relatively larger compared with that of real income on nuclear energy consumption in Canada, Germany, Japan, and the U.S.     

Electricity consumption and economic growth,the case of Lebanon

In this paper we investigate the causal relationship between electricity consumption and economic growth for Lebanon, using monthly data for Lebanon covering the period January 1995 to December 2005. Empirical results of the study confirm the absence of a long-term equilibrium relationship between electricity consumption and economic growth in Lebanon but the existence of unidirectional causality running from electricity consumption to economic growth when examined in a bivariate vector autoregression framework with change in temperature and relative humidity as exogenous variables. Thus, the policy makers in Lebanon should place priority in early stages of reconstruction on building capacity additions and infrastructure development of the electric power sector of Lebanon, as this would propel the economic growth of the country.     

Energy prices,volatility, and the stock market: Evidence from the Eurozone

This paper constitutes a first analysis on stock returns of energy corporations from the Eurozone. It focuses on the relationship between energy market developments and the pricing of European energy stocks. According to our results, oil price hikes negatively impact on stock returns of European utilities. However, they lead to an appreciation of oil and gas stocks. Interestingly, forecastable oil market volatility negatively affects European oil and gas stocks, implying profit opportunities for strategic investors. In contrast, the gas market does not play a role for the pricing of Eurozone energy stocks. Coal price developments affect the stock returns of European utilities. However, this effect is small compared to oil price impacts, although oil is barely used for electricity generation in Europe. This suggests that for the European stock market, the oil price is the main indicator for energy price developments as a whole.     

Energy consumption and economic growth: New insights into the cointegration relationship

This paper examines the long-run relationship between energy consumption and real GDP, including energy prices, for 25 OECD countries from 1981 to 2007. The distinction between common factors and idiosyncratic components using principal component analysis allows to distinguish between developments on an international and a national level as drivers of the long-run relationship. Indeed, cointegration between the common components of the underlying variables indicates that international developments dominate the long-run relationship between energy consumption and real GDP. Furthermore, the results suggest that energy consumption is price-inelastic. Causality tests indicate the presence of a bi-directional causal relationship between energy consumption and economic growth.     

Energy and output dynamics in Bangladesh

The relationship between energy consumption and output is still ambiguous in the existing literature. The economy of Bangladesh, having spectacular output growth and rising energy demand as well as energy efficiency in recent decades, can be an ideal case for examining energy-output dynamics. We find that while fluctuations in energy consumption do not affect output fluctuations, movements in output inversely affect movements in energy use. The results of Granger causality tests in this respect are consistent with those of innovative accounting that includes variance decompositions and impulse responses. Autoregressive distributed lag models also suggest a role of output in Bangladesh's energy use. Hence, the findings of this study have policy implications for other developing nations where measures for energy conservation and efficiency can be relevant in policymaking.     

The causality relationship between energy consumption and GDP in G-11 countries revisited

This paper explores whether energy conservation policies can be implemented in countries with the same level of development. That is, is restraining energy consumption without compromising economic growth feasible in all industrialized countries? A new Granger non-causality testing procedure developed by Toda and Yamamoto [1995, Journal of Econometrics 66, 225–250] is applied to re-investigate the relationship, if any, between energy consumption and income in 11 major industrialized countries. The results clearly do not support the view that energy consumption and income are neutral with respect to each other, except in the case of the United Kingdom, Germany and Sweden where a neutral relationship is found. Bi-directional causality in the United States and uni-directional running from energy consumption to GDP in Canada, Belgium, the Netherlands and Switzerland are found. This indicates that energy conservation may hinder economic growth in the latter five countries. Further, the causality relationship appears to be uni-directional but reversed for France, Italy and Japan which implies that, in these three countries, energy conservation may be viable without being detrimental to economic growth.     

Energy consumption,economic growth and prices: A reassessment using panel VECM for developed and developing countries

This paper reinvestigates the energy consumption–GDP growth nexus in a panel error correction model using data on 20 net energy importers and exporters from 1971 to 2002. Among the energy exporters, there was bidirectional causality between economic growth and energy consumption in the developed countries in both the short and long run, while in the developing countries energy consumption stimulates growth only in the short run. The former result is also found for energy importers and the latter result exists only for the developed countries within this category. In addition, compared to the developing countries, the developed countries’ elasticity response in terms of economic growth from an increase in energy consumption is larger although its income elasticity is lower and less than unitary. Lastly, the implications for energy policy calling for a more holistic approach are discussed.     

World oil prices,precious metal prices and macroeconomy in Turkey

We examine the long- and short-run transmissions of information between the world oil price, Turkish interest rate, Turkish lira–US dollar exchange rate, and domestic spot gold and silver price. We find that the world oil price has no predictive power of the precious metal prices, the interest rate or the exchange rate market in Turkey. The results also show that the Turkish spot precious metals, exchange rate and bond markets do not also provide information that would help improve the forecasts of world oil prices in the long run. The findings suggest that domestic gold is also considered a safe haven in Turkey during devaluation of the Turkish lira, as it is globally. It is interesting to note that there does not seem to be any significant influence of developments in the world oil markets on Turkish markets in the short run either. However, transitory positive initial impacts of innovations in oil prices on gold and silver markets are observed. The short-run price transmissions between the world oil market and the Turkish precious metal markets have implications for policy makers in emerging markets and both local and global investors in the precious metals market and the oil market.     

CO2 emissions,nuclear energy,renewable energy and economic growth in the US

This study explores the causal relationship between carbon dioxide (CO₂) emissions, renewable and nuclear energy consumption and real GDP for the US for the period 1960–2007. Using a modified version of the Granger causality test, we found a unidirectional causality running from nuclear energy consumption to CO₂ emissions without feedback but no causality running from renewable energy to CO₂ emissions. The econometric evidence seems to suggest that nuclear energy consumption can help to mitigate CO₂ emissions, but so far, renewable energy consumption has not reached a level where it can make a significant contribution to emissions reduction.     

Inequality across countries in energy intensities: An analysis of the role of energy transformation and final energy consumption

This paper analyzes the role of the energy transformation index and of final energy consumption per GDP unit in the disparities in energy intensity across countries. In that vein, we use a Theil decomposition approach to analyze global primary energy intensity inequality as well as inequality across different regions of the world and inequality within these regions. The paper first demonstrates the pre-eminence of divergence in final energy consumption per GDP unit in explaining global primary energy intensity inequality and its evolution during the 1971-2006 period. Secondly, it shows the lower (albeit non negligible) impact of the transformation index in global primary energy inequality. Thirdly, the relevance of regions as unit of analysis in studying cross-country energy intensity inequality and their explanatory factors is highlighted. And finally, how regions around the world differ as to the relevance of the energy transformation index in explaining primary energy intensity inequality.     

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.     

Household energy consumption versus income and relative standard of living: A panel approach

Our fundamental premise is that energy consumption at the household level is a key indicator of standard of living. We employ state-of-the-art panel cointegration techniques to evaluate the nature of the relationship between income measures and energy consumption measures for seven East Indian Ocean countries. The general finding is that income and household electricity consumption are not cointegrated. Given this finding, we conclude that standard of living measures that rely on income measures and do not include household-level energy consumption information will necessarily miss important indications of both levels and changes of standard of living.     

Environmental climate instruments in Romania: A comparative approach using dynamic CGE modelling

This study simulates a CO₂ permit market in Romania using a dynamic general equilibrium model. The carbon constraint is set at 20.7% below the reference emissions level for sectors eligible according to the European Union Emission Trading Scheme (EU-ETS). Free permit distribution enhances growth despite a severe emissions cap, because environmental regulation stimulates structural changes [Porter, M., 1991. American's green strategy. Scientific American 264, 168]. That is, grandfathering allows sectors additional resources to invest in developing technologies, but it also raises the CO₂ abatement costs because of energy rebound effects from enhanced growth. Results under endogenous growth [Romer, P.M., 1990. Endogenous technological change. Journal of Political Economy 98 (5), 71–102] are very similar to those obtained under an exogenous growth scenario [Ramsey, Y.F., 1928. A mathematical theory of saving. Economic Journal 38, 543–559], as the substitution effects are responsible for the majority of variations; in addition, Romanian research activities are too modest to significantly impact this system. The abatement cost per unit of GDP is higher under endogenous growth, as spillover effects reduce incentives to invest. Technological diffusion continues to have a positive impact on economic growth, which counterbalances the free-riding attitude adopted by some energy-intensive sectors, such as glass and cement.     

Analyzing energy consumption and GDP nexus using maximum entropy bootstrap: The case of Turkey

We employ a maximum entropy bootstrap based framework to analyze the energy consumption and real GDP nexus between 1950 and 2006 in Turkey. Our approach provides more accurate inference in comparison to conventional hypothesis tests based on asymptotic theory. It also avoids preliminary testing and shape-destroying transformations such as differencing and detrending. The bivariate analysis as well as a multivariate framework controlling for exchange rate and oil prices shows no evidence of a causal relation. Our results are robust to both the number of lags and the time period chosen. We also perform a cointegration analysis of the data and point out a common misunderstanding in the literature regarding the concept of causation.     

Energy consumption and economic growth: The case of oil exporting countries

This paper examines the causal relationship between the per capita energy consumption and the per capita GDP in a panel of 11 selected oil exporting countries by using panel unit-root tests and panel cointegration analysis. The results show a unidirectional strong causality from economic growth to energy consumption for the oil exporting countries. The findings have practical policy implications for decision makers in the area of macroeconomic planning. In most major oil exporting countries, government policies keep domestic prices bellow free market level, resulting in high levels of domestic energy consumption. The results imply that the energy conservation through reforming energy price policies has no damaging repercussions on economic growth for this group of countries.     

Energy consumption and economic growth: The experience of African countries revisited

The aim of this paper is to re-examine the causal relationship between energy consumption and economic growth for seventeen African countries in a multivariate framework by including labor and capital as additional variables. We apply the variance decomposition analysis due to Pesaran and Shin [Pesaran M.H. and Shin, Y. Generalised impulse response analysis in linear multivariate models, Economics Letters, 1998; 58; 17–29.] to evaluate how important is the causal impact of energy consumption on economic growth relative to labor and capital. The results of our multivariate modified Granger causality analysis due to Toda and Yamamoto [Toda, H.Y. and Yamamoto, T. Statistical inference in vector autoregressions with possibly integrated process, Journal of Econometrics, 1995; 66; 225–250.] tend to reject the neutrality hypothesis for the energy–income relationship in fifteen out of the seventeen countries. In contrast, results of our variance decomposition analyses show that in eleven out of the seventeen countries, energy is no more than a contributing factor to output growth and not an important one when compared to capital and labor. Labor and capital are the most important factors in output growth in fifteen out of the seventeen countries. However, these results should be interpreted with care as they may not be sufficiently robust enough to support the inference that energy consumption plays a minor role in the economic growth of African countries.     

A dynamic equilibrium of electricity consumption and GDP in Hong Kong: An empirical investigation

Public debates on electricity policy in Hong Kong focus on the regulation regime but seldom discuss the macroeconomic impact. In this paper, we use the novel dataset on electricity consumption and report the following findings: (1) there is a long run equilibrium relationship between real GDP and electricity consumption; (2) a one-way causal effect exists from electricity consumption to real GDP; (3) a significant adjustment process occurs when equilibrium is interrupted; (4) there exists possible structural change in the relationship between electricity consumption and economic activities in 1990s.     

Output,renewable and non-renewable energy consumption and international trade: Evidence from a panel of 69 countries

This paper uses panel cointegration techniques to examine the causal relationship between output, renewable and non-renewable energy consumption, and international trade for a sample of 69 countries during the period 1980–2010. In the short-run, Granger causality tests show that there is a bidirectional causality between output and trade (exports or imports), a bidirectional causality between non-renewable energy and trade, and a one way causality running from renewable energy to trade. In the long-run, a bidirectional causality between renewable energy and trade, is noticed. Our long-run ordinary least squares (OLS), fully modified OLS (FMOLS) and dynamic OLS (DOLS) estimates suggest that renewable, non-renewable energy consumption and trade have a positive and statistically significant impact on economic growth. Our energy policy recommendations are the following: i) any non-renewable energy policy should take into account the importance of international trade, ii) more renewable energy use should be encouraged by national and international competent authorities in order to increase international economic exchanges and promote economic growth without harming the environment, and iii) increasing trade is a good vehicle for renewable energy technology transfer and contributes to increase renewable energy consumption in the long-run, thus contributing to reducing greenhouse gas emissions.     

Jumps and stochastic volatility in oil prices: Time series evidence

In this paper we examine the empirical performance of affine jump diffusion models with stochastic volatility in a time series study of crude oil prices. We compare four different models and estimate them using the Markov Chain Monte Carlo method. The support for a stochastic volatility model including jumps in both prices and volatility is strong and the model clearly outperforms the others in terms of a superior fit to data. Our estimation method allows us to obtain a detailed study of oil prices during two periods of extreme market stress included in our sample; the Gulf war and the recent financial crisis. We also address the economic significance of model choice in two option pricing applications. The implied volatilities generated by the different estimated models are compared and we price a real option to develop an oil field. Our findings indicate that model choice can have a material effect on the option values.     

Nonparametric modeling of carbon prices

This paper constitutes the first exercise of nonparametric modeling applied to carbon markets. The framework of analysis is carefully detailed, and the empirical application unfolds in the case of BlueNext spot and ECX futures prices. The data is gathered in daily frequency from April 2005 to April 2010. First, we document the presence of strong nonlinearities in the conditional mean functions. Second, the conditional volatility functions reveal an asymmetric and heteroskedastic behavior which is dramatically different between carbon spot and futures logreturns. The results for spot prices are also robust to subsamples' decomposition. Third, we show in an out-of-sample forecasting exercise that nonparametric modeling allows reducing the prediction error by almost 15% compared to linear AR models. This latter result is confirmed by the Diebold–Mariano pairwise test statistic.