Revisiting energy consumption and GDP causality: Importance of a priori hypothesis testing, disaggregated data, and heterogeneous panels

Brantley Liddle and Sidney Lung

Applied Energy, 2015, vol. 142, issue C, 44-55

Abstract: This paper disaggregates energy consumption and GDP data according to end-use to analyze a broad number of developed and developing countries grouped in panels by similar characteristics. Panel long-run causality is assessed with a relatively under-utilized approach recommend by Canning and Pedroni (2008) [1]. We examine (i) reduced form production function models for both the industry and service/commercial sectors, where aggregate energy consumption is expected to cause aggregate output; and (ii) reduced form demand models, where income is expected to cause (separately) per capita residential electricity consumption and per capita gasoline consumption. We uncover for 12 different panels a set of super-consistent causality findings across two demand models that income “Granger-causes” per capita consumption. By contrast, the results from the production function models suggest that a different modeling framework is required to glean new, useful insights.

Keywords: Energy consumption; Economic growth; Panel Granger causality; Heterogeneous panels; Developed and developing countries; Cross-sectional dependence (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:appene:v:142:y:2015:i:c:p:44-55

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DOI: 10.1016/j.apenergy.2014.12.036

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