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Causality between energy and output in the long-run

David Stern () and Kerstin Enflo

Energy Economics, 2013, vol. 39, issue C, 135-146

Abstract: Though there is a very large literature examining whether energy use Granger causes economic output or vice versa, it is fairly inconclusive. Almost all existing studies use relatively short time series, or panels with a relatively small time dimension. We apply Granger causality and cointegration techniques to a Swedish time series dataset spanning 150years to test whether increases in energy use and energy quality have driven economic growth or vice versa. We show that these techniques are very sensitive to variable definition, choice of additional variables in the model, sample periods and size, and the introduction of structural breaks. The relationship between energy and growth may also have changed over time – energy causes output in the full sample while output causes energy use in recent smaller samples. Energy prices have a more robust causal impact on both energy use and output.

Keywords: Energy; Macroeconomics; Granger causality; Cointegration; Sweden (search for similar items in EconPapers)
JEL-codes: Q43 C32 C52 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Causality Between Energy and Output in the Long-Run (2013) Downloads
Working Paper: Causality Between Energy and Output in the Long-Run (2013) Downloads
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