A Time-Series Analysis of the Aggregate Income-Energy Consumption Nexus: The Case of Italy

The Journal of Energy and Development, 39, 1-2, 219-227, ISSN: 0361-4476

9 Pages Posted: 14 Oct 2014

See all articles by Cosimo Magazzino

Cosimo Magazzino

University of Rome III; Royal Economic Society; Italian Economic Association

Lorenzo Giolli

University eCampus

Date Written: 2014

Abstract

We empirically analyze the nexus between GDP and energy consumption in the 1970-2009 years for Italy, using a time-series approach. After a brief introduction, we present the discussion of the data. Stationarity tests reveal that both series are non-stationary, or I(1). Moreover, since both series show the presence of a structural break, a Gregory and Hansen cointegration test has been performed. The results evidence the presence of a long-run relationship. Causality tests reveal that the “neutrality hypothesis” emerges, insomuch as the absence of a causal relationship between energy consumption and real GDP is discovered. The IRFs analysis evidences that a shock to the energy consumption affects GDP for one period, but dies out very quickly. While shocks to GDP create a smaller but significant response in the energy consumption, although it falls to zero in few periods. Finally, we calculate with an ECM that the long-run multiplier is 0.70. The energy consumption will increase to correct the disequilibrium, with 11% of the (remaining) deviation corrected in each subsequent time period. In addition, a one-unit increase in the GDP immediately produces a 1.07 unit increase in the energy consumption.

Keywords: Energy policies, energy consumption, GDP, time series, Italy

JEL Classification: B22, C22, N54, Q43

Suggested Citation

Magazzino, Cosimo and Giolli, Lorenzo, A Time-Series Analysis of the Aggregate Income-Energy Consumption Nexus: The Case of Italy (2014). The Journal of Energy and Development, 39, 1-2, 219-227, ISSN: 0361-4476, Available at SSRN: https://ssrn.com/abstract=2508864

Cosimo Magazzino (Contact Author)

University of Rome III ( email )

Via Ostiense 139
Rome, RM 00154
Italy

HOME PAGE: http://scienzepolitiche.uniroma3.it/cmagazzino/

Royal Economic Society ( email )

London
United Kingdom

Italian Economic Association ( email )

Piazzale Martelli, 8
Ancona, AN 60121
Italy

HOME PAGE: http://www.siecon.org/online/en/

Lorenzo Giolli

University eCampus

Via Isimbardi, 10
Ostfildern
Novedrate, Como 22060
Italy

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