The direction of the causality between energy consumption and income is an important issue in the fields of energy economics, economic growth, and policies toward energy use. The seminal work on the relations between energy consumption and aggregate income is Kraft and Kraft (1978). An extensive literature has followed, but the array of findings provide anything but consensus on either the existence of relations or direction of causality between the variables. The work in this paper extends this research by analysing the cointegrating and causal relations between income and three energy consumption series based on panel data and the latest panel methodologies. These relations are analysed for the 30 OECD countries and 26 non-OECD countries. The results support a finding of causality flowing from income to energy consumption for developed and developing economies, alike.
AbosedraS.BaghestaniH. (1991). “New Evidence on the Causal Relationship between United States Energy Consumption and Gross National Product.” Journal of Energy and Development14(2): 285-292.
2.
AkarcaA.T.LongT.V.II (1980). “On the Relationship between Energy and GNP: a Reexamination.” Journal of Energy and Development5(2): 326-331.
3.
Al-IrianiM.A. (2006). “Energy-GDP Relationship Revisited: An Example from GCC Countries Using Panel Causality.” Energy Policy34(17), 3342-3350.
4.
AndrewsD.W.K. (1991). “Heteroskedasticity and Autocorrelation Consistent Autocovariance Matrix.” Econometrica59: 817-858.
5.
BanerjeeA.CockerillL.RussellB. (2001). “An I(2) Analysis of Inflation and the Markup.” Journal of Applied Econometrics16: 221-240.
6.
BreitungJ. (2000). “The Local Power of Some Unit Root Tests for Panel Data.” In B.H. Baltagi, T.B. Fomby, and R.C. Hill (eds), Nonstationary Panels, Panel Cointegration, and Dynamic Panels, Advances in Econometrics, Vol. 15. Elsevier Science, Amsterdam. pp. 161-178.
7.
CanningD.PedroniP. (2008). “Infrastructure, Long-Run Economic Growth and Causality Tests for Cointegrated Panels.” The Manchester School76: 504-527.
8.
Carrion-i-SilvestreJ.L.Del Barrio-CastroT.Lopez-BazoE. (2005). “Breaking the Panels: an Application to the GDP Per Capita.” Econometrics Journal8: 159-175.
9.
ChoiI. (2006). “Combination unit root tests for cross-sectionally correlated panels.” In D. Corbae.
10.
DurlaufS. N.HansenB. (eds), Econometric Theory and Practice: Frontiers of Analysis and Applied Research: Essays in Honour of Peter C.B. Phillips, Cambridge University Press. pp. 311333.
11.
DzioubinskiO.ChipmanR. (1999). “Trends in Consumption and Production: Household Energy Consumption.” DESA Discussion Paper No. 6, Economic and Social Affairs, United Nations.
12.
ErolU.YuE.S.H. (1988). “On the Causal Relationship between Energy and Income for Industrialized Countries.” Journal of Energy and Development13(1): 113-122.
13.
FrankelJ.A.RomerD. (1999). “Does Trade Cause Growth?” The American Economic Review, 89(3): 379-399.
14.
HadriK. (2000). “Testing for Stationarity in Heterogeneous Panel Data.” Econometrics Journal3: 148-161.
15.
HarrisR.D.I.SollisR. (2003). Applied Time Series Modelling and Forecasting: Wiley.
16.
HurlinC. (2004). “A Note on Causality Tests in Panel Data Models with Random Coefficients.” Mimeo, University Orleans.
17.
HurlinC. (2005). “Un Test Simple de l’Hypothese de Non-Causalite dans un Modele de Panel Heterogene”, Revue Economique 56(3): 799-809.
18.
HurlinC. (2008). “Testing Granger Causality in Heterogeneous Panel Data Models with Fixed Coefficients.” Working Papers halshs-00224434_v1, HAL.
19.
HurlinC.VenetB. (2008). “Financial Development and Growth: A Re-Examination using a Panel Granger Causality Test.” Working Papers halshs-00319995_v1, H.
20.
HwangD.B.K.GumB. (1992). “The Causal Relationship between Energy and GNP: the Case of Taiwan.” Journal of Energy and Development16(2): 219-226.
21.
ImK. S.PesaranM. H.ShinY. (2003). “Testing for Unit Roots in Heterogeneous Panels.” Journal of Econometrics115: 53-74.
22.
JoyeuxR.RippleR.D. (2007). “Household Energy Consumption Versus Income and Relative Standard of Living: A Panel Approach.” Energy Policy35: 50-60.
23.
KarlsonS.LothgrenM. (2000). “On the Power and Interpretation of Panel Unit Root Tests.” Economics Letters66: 249-255.
24.
KraftJ.KraftA. (1978). “On the Relationship between Energy and GNP.” Journal of Energy and Development3: 401-403.
25.
LeeC.-C. (2005). “Energy Consumption and GDP in Developing Countries: A Cointegrated Panel Analysis.” Energy Economics27: 415-427.
26.
LeeC.-C.ChangC. P. (2007). “The Impact of Energy Consumption on Economic Growth: Evidence from Linear and Nonlinear Models in Taiwan.” Energy32: 2282-2294.
MaddalaG. S.WuS. (1999). “A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test.” Oxford Bulletin of Economics and Statistics61: 631-652.
29.
MasihA.M.M.MasihR. (1996). “Energy Consumption, Real Income and Temporal Causality: Results from Multi-Country Study Based on Cointegration and Error-Correction Modeling Techniques.” Energy Economics18: 165-183.
30.
MasihA.M.M.MasihR. (1997). “On the Temporal Causal Relationship between Energy Consumption, Real Income, and Prices: Some New Evidence From Asian-Energy Dependent NICs Based on a Multivariate Cointegration/Vector Error-Correction Approach.” Journal of Policy Modeling19(4): 417-440.
31.
NarayanP.K.RussellS. (2008). “Energy Consumption and Real GDP in G7 Countries: New Evidence from Panel Cointegration with Structural Breaks.” Energy Economics30: 2331-2341.
32.
OhW.LeeK., (2004a). “Causal Relationship between Energy Consumption and GDP Revisited: The Case Of Korea 1970-1999.” Energy Economics26: 51-59.
33.
OhW.LeeK., (2004b). “Energy Consumption and Economic Growth in Korea: Testing the Causality Relation.” Journal of Policy Modeling26: 973-981.
34.
PedroniP. (1997). “Cross Sectional Dependence in Cointegration Tests of Purchasing Power Parity in Panels.” Working Paper in Economics, Indiana University.
35.
PedroniP. (1999). “Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors.” Oxford Bulletin of Economic and Statistics61: 727-731.
36.
PedroniP. (2004). “Panel Cointegration, Asymptotic and Finite Sample Properties of Pooled Time Series tests with an Application to the PPP hypothesis.” Econometric Theory20(3): 597-625.
37.
PesaranM.H. (1997). “The Role of Economic Theory in Modelling the Long Run.” The Economic Journal107: 178-191.
38.
PesaranM.H. (2007). “A Simple Panel Unit Root Test in the Presence of Cross-Section Dependence.” Journal of Applied Econometrics2: 265-312.
39.
PesaranM.H.SmithR.P.ImK.S. (1996). “Dynamic Linear Models for Heterogeneous Panels.” In Matyas, L. and P. Sevestre (eds), The econometrics of panel data: a handbook of theory with applications, 2nd revised ed., Kluwer Academic Publishers, Dordrecht.
40.
PesaranM.H.ShinY.SmithR. (1999). “Pooled Mean Group Estimation of Dynamic Heterogeneous Panels.” Journal of the American Statistical Association94: 621-634.
41.
PhillipsP.C.B.SulD. (2003). “Dynamic Panel Estimation and Homogeneity Testing under crosssection dependence.” Econometrics Journal6: 217-59.
42.
SoytasU.SariR. (2003). “Energy Consumption and GDP: Causality Relationship in G-7 Countries and Emerging Markets.” Energy Economics25: 33-37.
43.
TodaH.Y.PhillipsP.C.B. (1993). “Vector Autoregressions and Causality.” Econometrica61: 1367-1393.
44.
WesterlundJ. (2006). “Testing for Panel Cointegration with Multiple Structural Breaks.” Oxford Bulletin of Economics and Statistics68: 101-132.
45.
YuE.S.H.ChoiJ.Y. (1985). “The Causal Relationship between Energy and GNP: An International Comparison.” Journal of Energy and Development10(2): 249-272.
