The energy–GDP nexus; addressing an old question with new methods

Robin Coers and Mark Sanders

Energy Economics, 2013, vol. 36, issue C, 708-715

Abstract: This paper reassesses the causal relationship between per capita energy use and gross domestic product, while controlling for capital and labour (productivity) inputs in a panel of 30 OECD countries over the past 40years. The paper uses panel unit root and cointegration testing and specifies an appropriate vector error correction model to analyse the nexus between income and energy use. In doing so we contribute to an old debate using modern tools that shed a new light. There is some evidence that over the very short-run bidirectional causality exists. Our results also show a strong unidirectional causality running from capital formation and GDP to energy usage. In the long run the reverse causality, found in recent work, is lost. We then show that we can reproduce these earlier results in our data if we reproduce a slightly misspecified model for the Engle–Granger two-step procedure used in these earlier papers. Our findings thus imply that results are very sensitive to model misspecification and careful testing of specifications is required. Our results have some strong policy implications. They suggest that policies aimed at reducing energy usage or promoting energy efficiency are not likely to have a detrimental effect on economic growth, except over the very short run.

Keywords: Energy; GDP; Capital; Labour; Causality; Cointegration (search for similar items in EconPapers)
JEL-codes: C23 O10 Q40 Q43 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988312003131
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Energy-GDP Nexus; Addressing an old question with new methods (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:36:y:2013:i:c:p:708-715

DOI: 10.1016/j.eneco.2012.11.015

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().