Electricity Demand, GDP and Employment: Evidence from Italy
Magazzino, C., (2014), Electricity Demand, GDP and Employment: Evidence from Italy, Frontiers in Energy, 8, 1, 31-40, ISSN: 2095-1701
10 Pages Posted: 7 Mar 2014 Last revised: 16 Oct 2015
Date Written: November 20, 2013
This paper applies time series methodologies to examine the causal relationship among electricity demand, real per capita GDP and total labor force for Italy from 1970 to 2009. After a brief introduction, a survey of the economic literature on this issue is reported, before discussing the data and introducing the econometric techniques used. The results of estimation indicate that one cointegrating relationship exists among these variables. This equilibrium relation implies that, in the long-run, GDP and labor force are correlated negatively, as well as GDP and electricity. Moreover, there is a bi-directional Granger causality flow between real per capita GDP and electricity demand; while labor force does not Granger cause neither real per capita GDP nor electricity demand. This implies that electricity demand and economic growth are jointly determined at the same time for the Italian case. The forecast error variance decomposition shows that forecast errors in real per capita GDP are mainly caused by the uncertainty in GDP itself, while forecast errors in labor force are mainly resulted from the labor force itself, although aggregate income and electricity are important, too.
Keywords: energy policies, electricity demand, GDP, labor force, stationarity, structural breaks, cointegration, causality, Italy
JEL Classification: B22; C22; N54; Q43
Suggested Citation: Suggested Citation