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Long-run relation and short-run dynamics in energy consumption–output relationship: International evidence from country panels with different growth rates

Hassan Mohammadi () and Modhurima Amin

Energy Economics, 2015, vol. 52, issue PA, 118-126

Abstract: The long-run relation and short-run dynamics between output and consumption of energy (electricity) are examined in panels of countries with different growth rates. Seventy nine countries over 1971–2011 are grouped into high-, low- and negative-growth categories based on exponential growth rate of their per capita output. Tests of cointegration suggest the existence of long-run relation between energy (electricity) consumption and output in high- and low-growth panels but its absence in the panel with negative growth. Accounting for cross-country dependency strengthens the findings. Estimates of long-run elasticity of output with respect to energy (electricity) are significant in panels with positive growth rates. The common correlated effect mean-group estimators of the error-correction model suggest (1) long-run bidirectional causality between output and energy (electricity) in all three groups of countries, (2) short-run bidirectional causality in output-energy relation for the full sample as well as in the low-growth category; and (3) unidirectional causality from output to energy in the negative-growth category. The finding of long-run bidirectional causality is robust to inclusion of carbon emission, urbanization, exports, and foreign direct investment as control variables.

Keywords: Energy and electricity; Real GDP; Panel data; Mean-group estimator (search for similar items in EconPapers)
JEL-codes: B41 O13 O57 Q41 Q43 Q48 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.eneco.2015.09.012

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

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