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The causal link between energy and output growth: Evidence from Markov switching Granger causality

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  • Kandemir Kocaaslan, Ozge
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    Abstract

    In this paper we empirically investigate the causal link between energy consumption and economic growth employing a Markov switching Granger causality analysis. We carry out our investigation using annual U.S. real GDP, total final energy consumption and total primary energy consumption data which cover the period between 1968 and 2010. We find that there are significant changes in the causal relation between energy consumption and economic growth over the sample period under investigation. Our results show that total final energy consumption and total primary energy consumption have significant predictive content for real economic activity in the U.S. economy. Furthermore, the causality running from energy consumption to output growth seems to be strongly apparent particularly during the periods of economic downturn and energy crisis. We also document that output growth has predictive power in explaining total energy consumption. Furthermore, the power of output growth in predicting total energy consumption is found to diminish after the mid of 1980s.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 63 (2013)
    Issue (Month): C ()
    Pages: 1196-1206

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    Handle: RePEc:eee:enepol:v:63:y:2013:i:c:p:1196-1206

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    Web page: http://www.elsevier.com/locate/enpol

    Related research

    Keywords: Growth; Energy consumption; Markov-switching Granger causality;

    References

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    Cited by:
    1. Phiri, Andrew & Nyoni, Botha, 2014. "The electricity-growth nexus in South Africa: Evidence from asymmetric co-integration and co-feature analysis," MPRA Paper 56145, University Library of Munich, Germany.

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