The Relationship between Energy Consumption and Economic Growth: Evidence from China’s Industrial Sectors

Yi Hu, Dongmei Guo, Mingxi Wang, Xi Zhang and Shouyang Wang
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Yi Hu: School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China
Dongmei Guo: School of Economics, Central University of Finance and Economics, Beijing 100081, China
Mingxi Wang: School of International Trade and Economics, University of International Business and Economics, Beijing 100029, China
Xi Zhang: Business School, Hunan First Normal University, Changsha 410205, China
Shouyang Wang: School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China

Energies, 2015, vol. 8, issue 9, 1-15

Abstract: In this article, the relationship between energy consumption and economic growth is examined from the viewpoint of China’s industrial sectors. Panel data from 37 industrial sectors in China covering the period from 1998 to 2010 was used in this study. Not only first generation panel unit root tests and panel cointegration tests, but also second generation tests that account for dependence between cross-sectional units were employed. The empirical results reveal that both energy consumption and economic growth are integrated as order one, and they are cointegrated. Panel fully modified ordinary least squares estimators show that a 1% increase in energy consumption increases the real value added of industrial sectors by 0.871%, and a 1% increase in real value added of industrial sectors increases energy consumption by 1.103%. The panel vector error correction models for causality tests are estimated by a system generalized moment method. We find a unidirectional causal relation running from economic growth to energy consumption in the shortrun. In the long run, however, there is evidence of a unidirectional causality running from energy consumption to economic growth.

Keywords: energy consumption; economic growth; industrial sectors; panel causality; cross-sectional dependence (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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