Causal relationship between energy consumption (EC) and GDP: A Markov-switching (MS) causality

Firouz Fallahi

Energy, 2011, vol. 36, issue 7, 4165-4170

Abstract: This paper re-examines the causal relationship between energy use and Gross Domestic Product (GDP) in the United States for the period 1960–2005. To that end, we use Markov-switching vector autoregressive (MS-VAR) models, rather than vector autoregressive (VAR) models, which allows for regime shifts. These models are capable of detecting changes in the relationship between variables; in addition, the coefficients of the model are time dependent and they depend on the states of the variables. Therefore, in contrast to VAR and vector error correction models (VECM), which assume a stable relationship, the relationship between the variables could be different in the separate regimes.

Keywords: Energy use; GDP; Causality; Markov-switching (MS) (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (85)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:36:y:2011:i:7:p:4165-4170

DOI: 10.1016/j.energy.2011.04.027

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