ENERGY CONSUMPTION AND GDP IN THE OECD COUNTRIES: A CAUSALITY ANALYSIS

Mondiu T. Jaiyesimi, Tokunbo S. Osinubi and Lloyd Amaghionyeodiwe
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Mondiu T. Jaiyesimi: Department of Economics, University of Surrey, Guildford, Surrey, UK
Tokunbo S. Osinubi: Department of Business Administration, College of Business, Montana State University – Billings, Billings, Montana, USA
Lloyd Amaghionyeodiwe: Department of Accounting and Finance, York College, City University of New York, Jamaica, USA

Review of Economic and Business Studies, 2017, issue 19, 55-74

Abstract: This study investigated the nature or direction of causality between GDP, electricity consumption and total energy consumption in the OECD. Secondary data was used while both the ordinary least square (OLS) and generalized method of moments (GMM) estimators were employed to test for causality in our model. Our result found the presence of a bi-directional causality between energy consumption and GDP for the total energy demand model and between electricity consumption and GDP for the electricity demand model. By implication, the bi-directional causality in our estimated models suggest that both energy consumption and GDP are important factors in economic development in the OECD. Thus, if misguided policy measures are made to reduce energy consumption it could have a detrimental effect on GDP which will slow down economic growth. A recommendation is for policy makers to concentrate on encouraging energy efficiency as a way to reduce energy and electricity consumption.

Keywords: GDP; causality; Electricity Consumption; Energy consumption (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:aic:revebs:y:2017:j:19:osinubit

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