Regime dependent causality relationship between energy consumption and GDP growth: evidence from OECD countries

Furkan Emirmahmutoglu, Zulal Denaux, Tolga Omay and Aviral Tiwari

Applied Economics, 2021, vol. 53, issue 19, 2230-2241

Abstract: This study empirically investigates the energy consumption-GDP growth nexus for the period from 1971 to 2016 for 26 OECD countries. The prevailing studies in the literature use limited econometric methodologies, which may wrongly model the underlying relationship and lead to misleading policy conclusions. Our study utilizes the newest econometric methods to reveal the nonlinear relationships in the long-run. Furthermore, to capture the asymmetric behaviour of regime changes, four residual-based nonlinear cointegration tests are implemented. Finally, a two-regime TAR type of panel threshold VECM model (PTVAR) is estimated for testing the presence of nonlinear short- and long-run causality. Our findings indicate a state-dependent causality between energy consumption and GDP growth.

Date: 2021
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DOI: 10.1080/00036846.2020.1857330

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