Energy consumption and economic growth: New insights into the cointegration relationship |
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| Authors: | Ansgar Belke Frauke Dobnik Christian Dreger |
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| Affiliation: | aDepartment of Economics, University of Duisburg-Essen, Universitätsstrasse 12, 45117 Essen, Germany;bGerman Institute for Economic Research (DIW Berlin), Mohrenstrasse 58, 10117 Berlin, Germany;cInstitute for the Study of Labour (IZA), Schaumburg-Lippe-Strasse 5–9, 53113 Bonn, Germany;dRuhr Graduate School in Economics (RGS Econ), Germany;eDepartment of Economics, University of Frankfurt (Oder), post office box 1786, 15207 Frankfurt (Oder), Germany |
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| Abstract: | 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. |
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| Keywords: | JEL classification: C33 O13 Q43 |
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