IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v39y2011i6p3529-3536.html
   My bibliography  Save this article

Electricity consumption and economic growth nexus in Portugal using cointegration and causality approaches

Author

Listed:
  • Shahbaz, Muhammad
  • Tang, Chor Foon
  • Shahbaz Shabbir, Muhammad

Abstract

The aim of this paper is to re-examine the relationship between electricity consumption, economic growth, and employment in Portugal using the cointegration and Granger causality frameworks. This study covers the sample period from 1971 to 2009. We examine the presence of a long-run equilibrium relationship using the bounds testing approach to cointegration within the Unrestricted Error-Correction Model (UECM). Moreover, we examine the direction of causality between electricity consumption, economic growth, and employment in Portugal using the Granger causality test within the Vector Error-Correction Model (VECM). As a summary of the empirical findings, we find that electricity consumption, economic growth, and employment in Portugal are cointegrated and there is bi-directional Granger causality between the three variables in the long-run. With the exception of the Granger causality between electricity consumption and economic growth, the rest of the variables are also bi-directional Granger causality in the short-run. Furthermore, we find that there is unidirectional Granger causality running from economic growth to electricity consumption, but no evidence of reversal causality.

Suggested Citation

  • Shahbaz, Muhammad & Tang, Chor Foon & Shahbaz Shabbir, Muhammad, 2011. "Electricity consumption and economic growth nexus in Portugal using cointegration and causality approaches," Energy Policy, Elsevier, vol. 39(6), pages 3529-3536, June.
    • Handle: RePEc:eee:enepol:v:39:y:2011:i:6:p:3529-3536
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421511002412
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chen, Sheng-Tung & Kuo, Hsiao-I & Chen, Chi-Chung, 2007. "The relationship between GDP and electricity consumption in 10 Asian countries," Energy Policy, Elsevier, vol. 35(4), pages 2611-2621, April.
    2. Jamil, Faisal & Ahmad, Eatzaz, 2010. "The relationship between electricity consumption, electricity prices and GDP in Pakistan," Energy Policy, Elsevier, vol. 38(10), pages 6016-6025, October.
    3. Mohsen Bahmani-Oskooee & Taggert Brooks, 1999. "Bilateral J-Curve between U.S. and her trading partners," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 135(1), pages 156-165, March.
    4. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    5. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    6. Ozturk, Ilhan & Acaravci, Ali, 2010. "The causal relationship between energy consumption and GDP in Albania, Bulgaria, Hungary and Romania: Evidence from ARDL bound testing approach," Applied Energy, Elsevier, vol. 87(6), pages 1938-1943, June.
    7. Yoo, Seung-Hoon & Kim, Yeonbae, 2006. "Electricity generation and economic growth in Indonesia," Energy, Elsevier, vol. 31(14), pages 2890-2899.
    8. Tang, Chor Foon, 2008. "A re-examination of the relationship between electricity consumption and economic growth in Malaysia," Energy Policy, Elsevier, vol. 36(8), pages 3067-3075, August.
    9. Ouédraogo, Idrissa M., 2010. "Electricity consumption and economic growth in Burkina Faso: A cointegration analysis," Energy Economics, Elsevier, vol. 32(3), pages 524-531, May.
    10. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    11. Schwert, G William, 2002. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 5-17, January.
    12. Odhiambo, Nicholas M., 2009. "Electricity consumption and economic growth in South Africa: A trivariate causality test," Energy Economics, Elsevier, vol. 31(5), pages 635-640, September.
    13. Altinay, Galip & Karagol, Erdal, 2005. "Electricity consumption and economic growth: Evidence from Turkey," Energy Economics, Elsevier, vol. 27(6), pages 849-856, November.
    14. Engel, Charles, 1996. "The forward discount anomaly and the risk premium: A survey of recent evidence," Journal of Empirical Finance, Elsevier, vol. 3(2), pages 123-192, June.
    15. Mete Feridun & Muhammad Shahbaz, 2010. "Fighting Terrorism: Are Military Measures Effective? Empirical Evidence From Turkey," Defence and Peace Economics, Taylor & Francis Journals, vol. 21(2), pages 193-205.
    16. Zachariadis, Theodoros & Pashourtidou, Nicoletta, 2007. "An empirical analysis of electricity consumption in Cyprus," Energy Economics, Elsevier, vol. 29(2), pages 183-198, March.
    17. Mohsen Bahmani-Oskooee & Hanafiah Harvey, 2006. "How sensitive are Malaysia's bilateral trade flows to depreciation?," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1279-1286.
    18. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    19. Mozumder, Pallab & Marathe, Achla, 2007. "Causality relationship between electricity consumption and GDP in Bangladesh," Energy Policy, Elsevier, vol. 35(1), pages 395-402, January.
    20. Odhiambo, Nicholas M., 2009. "Energy consumption and economic growth nexus in Tanzania: An ARDL bounds testing approach," Energy Policy, Elsevier, vol. 37(2), pages 617-622, February.
    21. Narayan, Paresh Kumar & Prasad, Arti, 2008. "Electricity consumption-real GDP causality nexus: Evidence from a bootstrapped causality test for 30 OECD countries," Energy Policy, Elsevier, vol. 36(2), pages 910-918, February.
    22. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    23. Ozturk, Ilhan, 2010. "A literature survey on energy-growth nexus," Energy Policy, Elsevier, vol. 38(1), pages 340-349, January.
    24. Yang, Hao-Yen, 2000. "A note on the causal relationship between energy and GDP in Taiwan," Energy Economics, Elsevier, vol. 22(3), pages 309-317, June.
    25. Stern, David I., 1993. "Energy and economic growth in the USA : A multivariate approach," Energy Economics, Elsevier, vol. 15(2), pages 137-150, April.
    26. Ho, Chun-Yu & Siu, Kam Wing, 2007. "A dynamic equilibrium of electricity consumption and GDP in Hong Kong: An empirical investigation," Energy Policy, Elsevier, vol. 35(4), pages 2507-2513, April.
    27. Chontanawat, Jaruwan & Hunt, Lester C. & Pierse, Richard, 2008. "Does energy consumption cause economic growth?: Evidence from a systematic study of over 100 countries," Journal of Policy Modeling, Elsevier, vol. 30(2), pages 209-220.
    28. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
    29. Jumbe, Charles B. L., 2004. "Cointegration and causality between electricity consumption and GDP: empirical evidence from Malawi," Energy Economics, Elsevier, vol. 26(1), pages 61-68, January.
    30. Chandran, V.G.R. & Sharma, Susan & Madhavan, Karunagaran, 2010. "Electricity consumption-growth nexus: The case of Malaysia," Energy Policy, Elsevier, vol. 38(1), pages 606-612, January.
    31. Payne, James E., 2010. "A survey of the electricity consumption-growth literature," Applied Energy, Elsevier, vol. 87(3), pages 723-731, March.
    32. Yoo, S.-H., 2006. "The causal relationship between electricity consumption and economic growth in the ASEAN countries," Energy Policy, Elsevier, vol. 34(18), pages 3573-3582, December.
    33. Lean, Hooi Hooi & Smyth, Russell, 2010. "On the dynamics of aggregate output, electricity consumption and exports in Malaysia: Evidence from multivariate Granger causality tests," Applied Energy, Elsevier, vol. 87(6), pages 1963-1971, June.
    34. Shiu, Alice & Lam, Pun-Lee, 2004. "Electricity consumption and economic growth in China," Energy Policy, Elsevier, vol. 32(1), pages 47-54, January.
    35. Wolde-Rufael, Yemane, 2006. "Electricity consumption and economic growth: a time series experience for 17 African countries," Energy Policy, Elsevier, vol. 34(10), pages 1106-1114, July.
    36. Lee, Chien-Chiang & Chang, Chun-Ping, 2005. "Structural breaks, energy consumption, and economic growth revisited: Evidence from Taiwan," Energy Economics, Elsevier, vol. 27(6), pages 857-872, November.
    37. Kumar Narayan, Paresh & Singh, Baljeet, 2007. "The electricity consumption and GDP nexus for the Fiji Islands," Energy Economics, Elsevier, vol. 29(6), pages 1141-1150, November.
    38. Karanfil, Fatih, 2009. "How many times again will we examine the energy-income nexus using a limited range of traditional econometric tools?," Energy Policy, Elsevier, vol. 37(4), pages 1191-1194, April.
    39. Yuan, Jiahai & Zhao, Changhong & Yu, Shunkun & Hu, Zhaoguang, 2007. "Electricity consumption and economic growth in China: Cointegration and co-feature analysis," Energy Economics, Elsevier, vol. 29(6), pages 1179-1191, November.
    40. Mohsen Bahmani-Oskooee & Charikleia Economidou & Gour Goswami, 2006. "Bilateral J-curve between the UK vis-a-vis her major trading partners," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 879-888.
    41. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
    42. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    43. Yoo, Seung-Hoon & Kwak, So-Yoon, 2010. "Electricity consumption and economic growth in seven South American countries," Energy Policy, Elsevier, vol. 38(1), pages 181-188, January.
    44. Chor Foon Tang, 2009. "Electricity consumption, income, foreign direct investment, and population in Malaysia," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 36(4), pages 371-382, September.
    45. Tsangyao Chang & Wenshwo Fang & Li-Fang Wen, 2001. "Energy consumption, employment, output, and temporal causality: evidence from Taiwan based on cointegration and error-correction modelling techniques," Applied Economics, Taylor & Francis Journals, vol. 33(8), pages 1045-1056.
    46. Masih, Abul M. M. & Masih, Rumi, 1996. "Energy consumption, real income and temporal causality: results from a multi-country study based on cointegration and error-correction modelling techniques," Energy Economics, Elsevier, vol. 18(3), pages 165-183, July.
    47. Lutkepohl, Helmut, 1982. "Non-causality due to omitted variables," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 367-378, August.
    48. Narayan, Paresh Kumar & Smyth, Russell, 2005. "Electricity consumption, employment and real income in Australia evidence from multivariate Granger causality tests," Energy Policy, Elsevier, vol. 33(9), pages 1109-1116, June.
    49. Yoo, Seung-Hoon, 2005. "Electricity consumption and economic growth: evidence from Korea," Energy Policy, Elsevier, vol. 33(12), pages 1627-1632, August.
    50. Narayan, Paresh Kumar & Narayan, Seema & Prasad, Arti, 2008. "A structural VAR analysis of electricity consumption and real GDP: Evidence from the G7 countries," Energy Policy, Elsevier, vol. 36(7), pages 2765-2769, July.
    51. Squalli, Jay, 2007. "Electricity consumption and economic growth: Bounds and causality analyses of OPEC members," Energy Economics, Elsevier, vol. 29(6), pages 1192-1205, November.
    52. Hsiao, Cheng, 1981. "Autoregressive modelling and money-income causality detection," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 85-106.
    53. Paul Turner, 2006. "Response surfaces for an F-test for cointegration," Applied Economics Letters, Taylor & Francis Journals, vol. 13(8), pages 479-482.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tang, Chor Foon & Shahbaz, Muhammad & Arouri, Mohamed, 2013. "Re-investigating the electricity consumption and economic growth nexus in Portugal," Energy Policy, Elsevier, vol. 62(C), pages 1515-1524.
    2. Dakpogan, Arnaud & Smit, Eon, 2018. "The effect of electricity losses on GDP in Benin," MPRA Paper 89545, University Library of Munich, Germany.
    3. Tang, Chor Foon & Shahbaz, Muhammad, 2011. "Revisiting the Electricity Consumption-Growth Nexus for Portugal: Evidence from a Multivariate Framework Analysis," MPRA Paper 28393, University Library of Munich, Germany.
    4. Muhammad, Shahbaz, 2011. "Electricity Consumption, Financial Development and Economic Growth Nexus: A Revisit Study of Their Causality in Pakistan," MPRA Paper 35588, University Library of Munich, Germany, revised 27 Dec 2011.
    5. Chor Foon Tang and Eu Chye Tan, 2012. "Electricity Consumption and Economic Growth in Portugal: Evidence from a Multivariate Framework Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    6. Shahbaz, Muhammad & Mutascu, Mihai & Tiwari, Aviral Kumar, 2012. "Revisiting the Relationship between Electricity Consumption, Capital and Economic Growth: Cointegration and Causality Analysis in Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 97-120, September.
    7. Muhammad Shahbaz & Mete Feridun, 2012. "Electricity consumption and economic growth empirical evidence from Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 46(5), pages 1583-1599, August.
    8. Shahbaz, Muhammad & Lean, Hooi Hooi, 2012. "The dynamics of electricity consumption and economic growth: A revisit study of their causality in Pakistan," Energy, Elsevier, vol. 39(1), pages 146-153.
    9. Chen, Ping-Yu & Chen, Sheng-Tung & Chen, Chi-Chung, 2012. "Energy consumption and economic growth—New evidence from meta analysis," Energy Policy, Elsevier, vol. 44(C), pages 245-255.
    10. Sofien, Tiba & Omri, Anis, 2016. "Literature survey on the relationships between energy variables, environment and economic growth," MPRA Paper 82555, University Library of Munich, Germany, revised 14 Sep 2016.
    11. Kouakou, Auguste K., 2011. "Economic growth and electricity consumption in Cote d'Ivoire: Evidence from time series analysis," Energy Policy, Elsevier, vol. 39(6), pages 3638-3644, June.
    12. Solarin, Sakiru Adebola & Shahbaz, Muhammad, 2013. "Trivariate causality between economic growth, urbanisation and electricity consumption in Angola: Cointegration and causality analysis," Energy Policy, Elsevier, vol. 60(C), pages 876-884.
    13. Apergis, Nicholas & Payne, James E., 2011. "A dynamic panel study of economic development and the electricity consumption-growth nexus," Energy Economics, Elsevier, vol. 33(5), pages 770-781, September.
    14. Tiba, Sofien & Omri, Anis, 2017. "Literature survey on the relationships between energy, environment and economic growth," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 1129-1146.
    15. Payne, James E., 2010. "A survey of the electricity consumption-growth literature," Applied Energy, Elsevier, vol. 87(3), pages 723-731, March.
    16. Ozturk, Ilhan, 2010. "A literature survey on energy-growth nexus," Energy Policy, Elsevier, vol. 38(1), pages 340-349, January.
    17. Janesh Sami, 2011. "Multivariate Cointegration and Causality between Exports, Electricity Consumption and Real Income per Capita: Recent Evidence from Japan," International Journal of Energy Economics and Policy, Econjournals, vol. 1(3), pages 59-68, November.
    18. Omri, Anis, 2014. "An international literature survey on energy-economic growth nexus: Evidence from country-specific studies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 951-959.
    19. Saleheen, Khan & Farooq Ahmed, Jam & Muhammad, Shahbaz, 2012. "Electricity Consumption and Economic Growth in Kazakhstan: Fresh Evidence from a Multivariate Framework Analysis," MPRA Paper 43460, University Library of Munich, Germany, revised 20 Dec 2012.
    20. Kyophilavong, Phouphet & Shahbaz, Muhammad & Kim, Byoungki & OH, Jeong-Soo, 2017. "A note on the electricity-growth nexus in Lao PDR," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 1251-1260.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:39:y:2011:i:6:p:3529-3536. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.