Causality between Energy Consumption and Economic Growth in the Presence of Growth Volatility: Multi-Country Evidence

Gulasekaran Rajaguru and Safdar Ullah Khan
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Gulasekaran Rajaguru: Bond Business School, Bond University, Gold Coast, QLD 4229, Australia
Safdar Ullah Khan: Bond Business School, Bond University, Gold Coast, QLD 4229, Australia

JRFM, 2021, vol. 14, issue 10, 1-26

Abstract: Falling energy intensity (increasing efficiency) is believed to be a result of more efficient production methods that have evolved over time, indicating overall sustainability in the production process. The objective of this study is to investigate the diminishing trend of energy intensity and the related volatilities in growth of energy consumption and income growth through the energy–growth nexus. The country specific long-run and short-run causal relationships among real energy consumption per capita, real GDP per capita, and the volatilities of growth in income and the growth in energy consumption are established using the method proposed by Yamamoto–Kurozumi within a cointegration framework in 48 countries. The overall findings suggest that energy intensity is falling, in conjunction with the existing evidence on the energy–growth nexus in most of the countries studied; hence, implicitly this confirms sustainability. The results based on volatility analysis show a significant decrease in energy use in response to increasing income growth volatility. The negative effects of income growth volatility on energy consumption are usually countered through compensation measures, with subsidies provided to households and producers in order to smooth the energy consumption behaviours in those economies.

Keywords: keyword causality; energy consumption; economic growth; volatility; Yamamoto–Kurozumi framework (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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