Cointegration and causal relationships between energy consumption and output: Assessing the evidence from Australia

Md Shahiduzzaman and Khorshed Alam

Energy Economics, 2012, vol. 34, issue 6, 2182-2188

Abstract: In this paper, we describe our investigation of the cointegration and causal relationships between energy consumption and economic output in Australia over a period of five decades. The framework used in this paper is the single-sector aggregate production function, which is the first comprehensive approach used in an Australian study of this type to include energy, capital and labour as separate inputs of production. The empirical evidence points to a cointegration relationship between energy and output and implies that energy is an important variable in the cointegration space, as are conventional inputs capital and labour. We also find some evidence of bidirectional causality between GDP and energy use. Although the evidence of causality from energy use to GDP was relatively weak when using the thermal aggregate of energy use, once energy consumption was adjusted for energy quality, we found strong evidence of Granger causality from energy use to GDP in Australia over the investigated period. The results are robust, irrespective of the assumptions of linear trends in the cointegration models, and are applicable for different econometric approaches.

Keywords: Energy consumption; Economic growth; Time series analysis; Cointegration; Causality (search for similar items in EconPapers)
JEL-codes: C32 O13 Q43 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:34:y:2012:i:6:p:2182-2188

DOI: 10.1016/j.eneco.2012.03.006

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