Energy Consumption, Economic Development and Prices: Time Series Evidence in CESEE Countries
10 Pages Posted: 5 Apr 2014
Date Written: April 3, 2014
This paper estimates the causal relationships between energy consumption and income for Albania, Bosnia and Herzegovina, Serbia, and Macedonia (CESEE - Central, Eastern and Southeastern Europe countries), using cointegration and error-correction modelling techniques. The results indicate that energy consumption, income and prices are second order cointegrated, except for Albania where there exist only one cointegration relationship. In the error correction mechanism on the long run the results show that for the selected countries in the cointegration relationship only inflation does seems to enter significantly in the equation. On a short run also only inflation seems to affect energy consumption, while energy consumption seems to affect income on short run, but only in Albania. This study supports the view that energy and income are neutral. This means that in these countries there is scope for energy conservation measures without severe impact on their economic growth.
Keywords: energy consumption, income, prices
JEL Classification: Q40, Q43
Suggested Citation: Suggested Citation