Revisiting the impact of energy prices on economic growth: Lessons learned from the European Union

Athanasios S. Dagoumas, Michael Polemis () and Symeoni-Eleni Soursou

Economic Analysis and Policy, 2020, vol. 66, issue C, 85-95

Abstract: This study aims to re-investigate the long-run relationship among energy prices and economic growth within the periphery of the European Union. We rely on the Engle–Granger methodology to estimate a Vector-Error Correction Model. We also employ Variance Decomposition Analysis to estimate the causal effect of energy prices on economic growth. We provide evidence on the conservation hypothesis for the case of real GDP and residential electricity prices, as well as on the growth hypothesis for the case of real output and industrial electricity prices. The residential electricity sector exhibits the highest level of influence, as industrial electricity price and crude oil price “Granger cause” residential electricity prices. We also find signs of the feedback hypothesis concerning final energy consumption and residential electricity price. Lastly, the level of economic growth proxied by real GDP is strongly endogenous in the short-run, whereas shocks from other covariates seem to have a transitory effect.

Keywords: Economic growth; Electricity prices; Cointegration; Causality; European Union (search for similar items in EconPapers)
JEL-codes: C22 O47 Q43 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:66:y:2020:i:c:p:85-95

DOI: 10.1016/j.eap.2020.02.013

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