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Granger Causality Analysis of Energy Consumption and Value Added in Industrial Sub-Sectors of Iran: A Bootstrap Panel Approach

Leila Eghbali (), Reza Ranjpour () and Seyed Kamal Sadeghi ()
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Leila Eghbali: M.Sc. in Economic Development & Planning, Faculty of Economics and Management, University of Tabriz
Reza Ranjpour: Associate Professor of Economics, Faculty of Economics and Management, University of Tabriz
Seyed Kamal Sadeghi: Associate Professor of Economics, Faculty of Economics and Management, University of Tabriz

Quarterly Journal of Applied Theories of Economics, 2020, vol. 7, issue 3, 99-130

Abstract: Iran, as a developing country, has extensive energy resource types and is considered as an example of economic growth model based on natural resources. The industry is considered as one of the major sectors of energy consumption in the country, and determining the relationship between energy consumption and economic growth is one of the important issues in this field. In recent years, however, energy has become an interesting topic for researchers and only a limited number of studies on energy consumption have been done in industry's sub sectors. Therefore, this study evaulate the relationship between energy consumption and value added in industrial sub-sectors of Iran. The main aim of this research is to identify the relationship between total energy consumption and industrial sub-sectors value added of Iran during the period 1995-2017. The panel Granger causality was used to investigate the causality between variables based on the bootstrapping approach to accurately evaluate the results. According to the results, in sub-sectors of "rubber and plastic" and manufacture of "motor vehicles, trailers, and semi-trailers", the null hypothesis "value-added is not the cause of energy consumption" is rejected. In other words, the growth of value-added plays a significant impact on energy consumption in these sub-sectors, but in these sub-sectors and "machinery generator" and "electric transmission and unclassified electrical appliances", the energy consumption-growth hypothesis has been confirmed. In the rest of the sub-sectors of industries, the result confirms the neutral hypothesis. In other words, in many industrial sub-sectors, neither energy saving policies nor policies to increasing the energy consumption will have no impact on level and growth of production.

Keywords: Granger Causality; Bootstrap Panel Approach; Energy Consumption; Value Added; Industry Sub-sectors (search for similar items in EconPapers)
JEL-codes: C33 C53 O25 O53 Q41 Q43 (search for similar items in EconPapers)
Date: 2020
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