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Causality Between Energy and Output in the Long-Run

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  • Stern, David

    ()
    (Crawford School of Public Policy, Australian National University, Canberra)

  • Enflo, Kerstin

    ()
    (Department of Economic History, Lund University)

Abstract

Though there is a very large literature examining whether energy use Granger causes economic output or vice versa this literature is fairly inconclusive. Almost all existing studies use relatively short time series or panels with a relatively small time dimension. Additionally, many recent papers continue to use what seem to be misspecified models. We apply Granger causality and cointegration techniques to a Swedish time series data set on energy and economic growth spanning 150 years to test whether increases in energy use and energy quality have driven economic growth. We show that these techniques are very sensitive to variable definition, choice of additional variables in the model, and sample periods. All of the following appear to make a finding that energy causes growth more likely: using multivariate models, defining variables to better reflect their theoretical definition, using larger samples, and including appropriate structural breaks. However, it is also possible that the relationship between energy and growth has changed over time and that results from recent smaller samples reflect this. Energy prices have a significant causal impact on both energy use and output.

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Bibliographic Info

Paper provided by Department of Economic History, Lund University in its series Lund Papers in Economic History with number 126.

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Length: 43 pages
Date of creation: 20 Jan 2013
Date of revision:
Handle: RePEc:hhs:luekhi:0126

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Postal: Department of Economic History, Lund University, Box 7083, S-220 07 Lund, Sweden
Phone: +46 46-222 00 00
Fax: +46 46-13 15 85
Web page: http://www.ekh.lu.se/
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Keywords: Energy; macroeconomics; Granger causality; cointegration; causality; time series;

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References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. My Year in Review 2013
    by David Stern in Stochastic Trend on 2013-12-24 04:20:00
  2. Stern and Enflo, Energy Economics
    by David Stern in Stochastic Trend on 2013-05-05 08:17:00
  3. Casuality between Energy and Output in the Long-Run
    by David Stern in Stochastic Trend on 2013-01-21 00:51:00
  4. Elsevier Article Usage Dashboards and Tips for Early Career Researchers
    by noreply@blogger.com (David Stern) in Stochastic Trend on 2014-05-29 03:06:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Bruns, Stephan B. & Gross, Christian, 2013. "What if energy time series are not independent? Implications for energy-GDP causality analysis," Energy Economics, Elsevier, vol. 40(C), pages 753-759.
  2. Bruns, Stephan B. & Gross, Christian & Stern, David I., 2013. "Is There Really Granger Causality Between Energy Use and Output?," FCN Working Papers 11/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  3. Bahman Kashi, 2014. "Risk Management and the Stated Capital Costs by Independent Power Producers," Development Discussion Papers 2014-03, JDI Executive Programs.
  4. Astrid Kander & David I. Stern, 2013. "Economic Growth and the Transition from Traditional to Modern Energy in Sweden," CAMA Working Papers 2013-65, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  5. Paresh Narayan & Russell Smyth, 2014. "Applied Econometrics and a Decade of Energy Economics Research," Development Research Unit Working Paper Series 21-14, Monash University, Department of Economics.
  6. Liam Wagner & Ian Ross & John Foster & Ben Hankamer, 2013. "Tracking global fuel supply, CO2 emissions and sustainable development," Energy Economics and Management Group Working Papers 7-2013, School of Economics, University of Queensland, Australia.
  7. Omri, Anis, 2013. "CO2 emissions, energy consumption and economic growth nexus in MENA countries: Evidence from simultaneous equations models," Energy Economics, Elsevier, vol. 40(C), pages 657-664.

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