Energy Consumption and GDP in Italy: Cointegration and Causality Analysis
Environment, Development and Sustainability, 17, 1, 137-153, ISSN: 1387-585X
17 Pages Posted: 26 Jan 2015 Last revised: 16 Oct 2015
Date Written: 2015
The aim of this article was to assess the empirical evidence of the nexus between GDP and energy consumption for Italy during the period 1970-2009, using a time series approach. After a brief introduction, a survey of the economic literature on this issue is shown, before discussing the data and introducing some econometric techniques. Stationarity tests reveal that both series are nonstationary, or I(1). Moreover, a cointegration relationship is found between the two variables. The short-run dynamics of the variables show that the flow of causality runs from energy use to GDP, and there is a long-run bidirectional causal relationship (or feedback effect) between the two series. Consequently, we conclude that energy is a limiting factor to GDP growth in Italy and that energy conservation policy should be formulated and implemented wisely.
Keywords: Energy policies; Energy consumption; GDP; Stationarity; Cointegration; Causality; Italy
JEL Classification: B22; C22; N54; Q43
Suggested Citation: Suggested Citation