Energy Consumption and Economic Growth Revisited: Structural Breaks and Cross-Section Dependence

Abstract:     
This paper examines the causal relationship between real GDP and energy consumption for 23 OECD countries from 1971 to 2009. Using recently developed panel econometric techniques the present paper takes into account structural breaks and cross-section dependence when analyzing the energy consumption-growth nexus. The empirical results of this study indicate that there exists a long-run equilibrium relationship between real GDP and energy consumption, and the impact of real GDP on energy consumption is larger than vice versa. Furthermore, the empirical evidence of a dynamic panel error-correction model reveals a bidirectional causal relationship between economic growth and energy consumption in both the short and long run.

Number of Pages in PDF File: 45

Keywords: energy consumption, panel unit roots and cointegration, structural breaks, cross-section dependence, panel error-correction model, Granger causality

JEL Classification: C33, C23, Q43

working papers series