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Dynamic relationship between energy consumption and income in Tunisia: A SVECM approach

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  • Boufateh, Talel
  • Ajmi, Ahdi Noomen
  • El Montasser, Ghassen
  • Issaoui, Fakhri

Abstract

This study examines the short-run and long-run dynamics binding energy consumption to GDP using a structural vector error correction (SVECM) model during the period 1971-2009. In addition, a comparative study between Tunisia,the USA and Sweden is conducted. Results spread over two axes. First,the cyclical component of the model indicates that the instantaneous impact of a short run shock on energy is generally positive. However, the impact of this shock on output is positive in the USA and Sweden and negative in Tunisia. Therefore, it seems that unlike a small country like Tunisia where the productive system is directly penalized, developed countries are better able to cope with a transitory shock and find alternatives to productivity gains. Secondly concerning the trend component of the model, we conclude that the effect of a long run shock on energy consumption is positive in Tunisia while it is negative in the USA and Sweden. The effect of a long run shock on production for both the developed countries is positive and increasing. This findings seems interesting insofar as it reflects the willingness of developed countries substitute current energy sources by renewable and cleaner sources. It also reflects Tunisian dependence to current sources of electricity.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 44539.

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Date of creation: 15 Feb 2013
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Handle: RePEc:pra:mprapa:44539

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Keywords: Energy consumption; GDP; SVEC model; Tunisia;

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