Causality Relationship between Real GDP and Electricity Consumption in Romania (2001-2010)

After Industrial Revolution, importance of energy in production has increased. As a result of two petroleum crisis, energy was included directly into the production function. While development level of countries has increased, energy consumption has also raised. Substantial increase in energy consumption with economic growth provide a motivation to investigate questions “Is there is a relationship between energy consumption and economic growth?” and if there is “What kind of relationship exists between them?”. The aim of this study is to analyse dynamic causal relationship between electricity consumption and economic growth in the Romanian economy for the period of 2001 – 2010 to answer this question. To this end, we utilize the Dolado – Lütkepohl, Tado - Yamamoto and traditional Granger causality tests. In this regard, we use Phillips – Perron and Dickey Fuller – GLS unit root tests and Bai – Perron multiple structural breaks test. Results support that causality runs from electricity consumption to economic growth in the case of Romania economy.