Causal Relationship between Fossil Fuel Consumption and Economic Growth in Japan: A Multivariate Approach

Hazuki Ishida
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Hazuki Ishida: Fukushima University, Faculty of Symbiotic Systems Science, Fukushima, Japan

International Journal of Energy Economics and Policy, 2013, vol. 3, issue 2, 127-136

Abstract: This paper explores whether Japanese economy can continue to grow without extensive dependence on fossil fuels. The paper conducts time series analysis using a multivariate model of fossil fuels, non-fossil energy, labor, stock and GDP to investigate the relationship between fossil fuel consumption and economic growth in Japan. The results of cointegration tests indicate long-run relationships among the variables. Using a vector error-correction model, the study reveals bidirectional causality between fossil fuels and GDP. The results also show that there is no causal relationship between non-fossil energy and GDP. The results of cointegration analysis, Granger causality tests, and variance decomposition analysis imply that non-fossil energy may not necessarily be able to play the role of fossil fuels. Japan cannot seem to realize both continuous economic growth and the departure from dependence on fossil fuels. Hence, growth-oriented macroeconomic policies should be re-examined.

Keywords: Fossil fuels; Economic growth; Cointegration; Granger causality (search for similar items in EconPapers)
JEL-codes: Q32 Q43 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2013-02-2

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