The causal relationship between energy consumption and economic growth in Lebanon

Leila Dagher () and Talar Yacoubian

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the dynamic causal relationship between energy consumption and economic growth in Lebanon over the period 1980-2009. Within a bivariate framework, imposed on us due to data limitations, and in an effort to increase the robustness of our results, we employ a variety of causality tests, namely, Hsiao, Toda-Yamamoto, and vector error-correction based Granger causality tests. We find strong evidence of a bidirectional relationship both in the short run and in the long run, indicating that energy is a limiting factor to economic growth in Lebanon. From a policy perspective, the confirmation of the feedback hypothesis warns against the use of policy instruments geared towards restricting energy consumption, as these may lead to adverse effects on economic growth. Consequently, there is a pressing need to revise the current national energy policy that calls for a 5% energy conservation target. Also, to shield the country from external supply shocks, given its substantial dependence on energy imports, policymakers should emphasize the development of domestic energy resources. Further, the most pertinent implication is that relaxing the present electric capacity shortages should be made a national priority, in view of its potential positive effect on the economy.

Keywords: energy consumption; economic growth; Granger causality; Lebanon (search for similar items in EconPapers)
JEL-codes: C32 C51 O13 Q43 Q48 (search for similar items in EconPapers)
Date: 2011
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Related works:
Journal Article: The causal relationship between energy consumption and economic growth in Lebanon (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:116124

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